01 Feb Establishing essential infrastructure investments for the future of Portugal
Hugo Santos Mendes, Deputy Minister for Communications, foresees a market consolidation at the end of the pandemic
Let us begin the interview by hearing you sum up the ‘key logistics assets’ that Portugal boasts that make it a competitive EU member state?
Soon after Portugal entered the European Union, within the first couple of decades of membership, the country’s priority was to connect the domestic regions internally with more modern highways and railways. Ports, such as Sines, were given a low priority and suffered with a loss of competitiveness over time. The loss of competitiveness, capacity and flexibility came as we reacted late to a changing economy. I believe that in the last decade Portugal has increasingly structured its economy around exports, both goods and services and we eventually became a more modern and open economy. This structural change has been putting healthy pressure on our infrastructure. The Portuguese government and sector stakeholders, in the last few years, have been prioritising railways and ports in our investment plans.
It is also important to understand that Portugal has a peculiar condition, because it is in the periphery of Europe, but also in a strategic position when you look at the shipping routes from East and the Americas towards Europe. For instance our deep water port in Sines has definitely got potential to play a more relevant role in transatlantic connections. We are determined to provide the conditions for this to happen and we are making important contacts with other stakeholders to join forces with these strategic partners. We also have several ongoing projected investments in railway connection, improving the international corridor that connect us to Europe and in the next decade we are determined to improve the connections between our highly urbanised metropolitan Atlantic seaport from Lisbon to Porto. Last but not least, we are stretching to Vigo in Galicia in cooperation with our Spanish neighbours.
The high performance railway will provide this backbone to consolidate the metropolitan Atlantic seaboard as one of the most important economic regions in the whole Iberian Peninsula. Making it a privileged connection between Europe and the rest of the world. This means smaller distances, higher speed and increased frequency in all modes of transport. Longer and heavier trains will be crucial for Portugal’s development. There is also the current investment and the planned investment in the railways that is stated in the National Investment Programme 2030. It is also important to underline the major investments that are planned to increase the airport capacity in the Lisbon region. Prior to the pandemic our main airport was clearly over capacity. Now we have some time to properly react and rethink the project, but we have to advance with the Montijo Airport and begin construction which is expected in a few years’ time.
On September 30th, APS’ CEO, José Luís Cacho, presented the Strategic Options for the next ten years for the Port of Sines, setting the tone for the challenges that shape the horizon in a decade that will be marked by economy decarbonisation and an increasing digitalisation of the global world. In regards to nationwide port capabilities, what are the short and mid-term strategic objectives of the country to ensure that the maritime sector is in a position to support the economic recovery?
We have been and we will continue making investments in our major ports nationwide, not only Sines. Some of the investment will be private and some public. We are refurbishing infrastructure and, in some cases, converting them and expanding core capacity in terms of ship size and handling of cargo. The demand for our ports has been increasing both in intensity and frequency and in volume per freight, which is good, but it also means that port environmental performance must be improved. I think it is essential to underline that all the coherence of the plan and the integration of all projects is critical. This comprehensive view has worked in the past. We hope to maximise port profitability and to improve our internal and international competitiveness. Also the articulation between ports, dry ports and other logistics platforms and railways corridors are paramount. One good example is the Sines port. The railway facilities within the port and its connection to the main network are being upgraded and it will enable us to benefit from the construction of the international south corridor that links Sines to Badajoz in Spain. This corridor includes an entirely new stretch of railway between Evora and Elvas, that will shed hundreds of kilometres to the distance and bypass one of the most congested lines in the country and will significantly reduce the time between the port and the Spanish border. This will be completed by the end of 2023. We are also expanding the current Terminal 21 for containers and there is the international competitive bidding underway until April 2021 for the new Vasco de Gama terminal at Sines.
Knowing that 72.5 percent of TAP Airlines shares are now under government control, could you please highlight what are the current state of affairs and future plans of the flagship airline?
We have recently presented our draft proposal for TAPs restructuring plan to the European Commission. We look forward to continuing to work with the EC, in order to close an effective and credible plan, as soon as possible. In the meanwhile, we have also been working with the workers and the Unions represented in TAP, in order to improve the plan and find alternatives that are both feasible, credible and that could enable us to reach a better off solution. But we can, nonetheless recognize already that there are tough measures associated with it, as downsizing is happening in every airline across the world. In the future we plan to keep the airline within the state perimeters, but we also know that it is very difficult for an airline like TAP to be alone in the aviation market. It is also public that prior to the pandemic. David Neelman was negotiating with some airlines such as Lufthansa and United Airlines to sell his share. Fortunately that would be a good idea for TAP, because we needed and will need a lot of reliable partners with deep knowledge in the sector. Unfortunately, everything stopped due to the pandemic and the state needed to intervene. We still plan to keep the airline with us in the near future but we do not close the door to accepting investors. The next 2 to 5 years will be a testing time for the aviation sector and nobody knows what will be the conclusion following on from the pandemic. We can say that we will be open to speak to reliable, credible and experienced investors after the pandemic once the market stabilises again.
The European Commission had already indicated that in order to achieve carbon neutrality considerable additional investments would be necessary, in the order of EUR 175 to 290 billion per year, and it is crucial to increase investment in the energy system and related infrastructures from 2 percent of GDP to 2,8 percent. What role will future infrastructure developments play in the decarbonisation and digitalisation of the Portuguese economy?
In this area of government we have to underline right away that it will play an important role in the development of the economy. To begin with, we are completing the electrification of the railway network. In the coming years we will have better trains and a better performing rail network. We are also connecting all our main urban centres by train closing some existing gaps in the network, and this will significantly reduce the need for less sustainable need for transportation. This will also increase the value and competitiveness of our multimodal infrastructure. Moreover, regarding ports we will be connecting the wet and the dry ports and revamping the international railway corridors that connect us with our main economic partners. Investment will also be done in logistics completing and upgrading the procedures and software deployment associated with the Unique Logistic Window and the Unique Port Window that soon will be available in all our main ports. This will, combined with investment in data collecting analysis, support and increase the efficiency of port management, helping to harness the advantages of digitalisation in the transport sector to benefit the Portuguese economy.
We are also enabling our ports to provide onshore power supply and we are developing the concept of Green Ports, favouring partners that are aligned with business plans that support decarbonisation. For instance LNG bunkering, hydrogen production, solar plant connections are in the roadmap of opportunities and services related to our ports. Furthermore, the auction of the 5G spectrum licenses is currently ongoing with much interest revealed in these first few bids. This is an essential step to power our economy and industry with modern communication infrastructure.
Total financing under the European Fund for Strategic Investments in Portugal amounts to EUR 3.8 billion and is set to trigger EUR 13.2 billion in additional investments. As it stands, what are Portugal’s most attractive Investment opportunities linked to infrastructure and transport in general?
The newest terminal at Sines port, Vasco da Gama Terminal, is a project that immediately comes to mind as an opportunity to invest. Interested investors can present their bids for the international tender until April 2021. We also have significant investments in Leixões and Oporto. There is also the national rail plan that we are launching which will promote the construction of high speed rail connecting Lisbon and Oporto and Oporto and Vigo, which depends also on Spanish investment. This is the single most significant investment opportunity connected to the rail network. Also very important is the New Lisbon Area Airport, that will probably be developed in Montijo. We are working with ANA to expand Lisbon’s airport capacity South of the river. Finally, we can also highlight the tenders for 5G spectrum licenses which are being made available by our regulator Anacom.
We are evidently living through a time of changing paradigms. Many companies and governments are reanalysing their operating models and reassessing their strategies for a more long-term strategic outlook and to decrease their reliance on the Far East. How do you envision this will affect how the Portuguese government approaches their strategy for infrastructure and transport?
Quite frankly I think that nobody is certain what the next economic paradigm will look like in the near future or even in the next decade. Perhaps there is a degree of de-globalisation that will happen across the globe, which places a question mark above the shipping sector. Even if we take for granted that globalisation loses strength, we ignore what it could do within the regional level in term of cooperation.
One thing is certain, Portugal will always have an interest in being a trading nation, since it is the only way to mitigate the shortcoming of having a small domestic market and being a peripheral region if we consider only ourselves from a Eurocentric point of view. Trade is essential to provide scale to our economy. I do not want to downplay the uncertainty of the near future, but I believe that most of the investment plans and strategic goals that our government has should be sufficiently robust and economically sustainable when we look at the Portuguese context.
In order to conclude, could you share with the global readers of Newsweek a message of optimism and reassurance about Portugal and the rebooting of its economy?
I think Portugal in the context of EU membership has proven that the country can manage to overcome the hardships of the last economic decade. The country has recovered, but this pandemic has cut our growth trajectory without warning. Nevertheless, I think we already have ourselves rolled up, ready to work and the country will react swiftly. We are actively sponsoring support for our business ecosystem in order to reach the other side with minimum negative impact. We hope that we convert this crisis into an opportunity in the future. The Portuguese authorities aligned with private stakeholder are preparing a comprehensive National Investment Programme that coordinates national funds, European funds and this will help reboot our economy and take advantage of the next decade. Of course transport and infrastructure are a central pillar of that investment.