From Business Entry to Insolvency: Portugal’s Roadmap for Economic Resilience

The B-READY study highlights Portugal’s strengths in efficient business entry and utility services, while identifying areas for improvement in digital permit systems, dispute resolution, and insolvency processes to foster a more cohesive, business-friendly climate across regions. By addressing these gaps, Portugal can enhance regional economic growth and support a unified business environment.

The World Bank’s Subnational Business Ready (B-READY) study, conducted in collaboration with the European Commission’s Directorate-General for Regional and Urban Policy, assesses the business environments across eight Portuguese cities: Braga, Coimbra, Évora, Faro, Funchal, Lisbon, Ponta Delgada, and Porto. By examining local regulatory frameworks, public services, and operational efficiency in crucial areas such as Business Entry, Business Location, Utility Services, Dispute Resolution, and Business Insolvency, the B-READY study aims to provide insights that can guide policymakers toward fostering a more business-friendly climate. With a focus on supporting economic growth, job creation, and regional resilience, this comprehensive analysis highlights both Portugal’s strengths and areas needing improvement to establish a unified, competitive business environment.

Efficient Business Entry and Utility Services Stand Out

Portugal performs strongly in Business Entry and Utility Services, which are streamlined to make starting a company straightforward and provide relatively accessible utility services like electricity, water, and internet. Thanks to initiatives like Empresa na hora and Empresa Online, entrepreneurs can efficiently handle company registration and administrative processes online. Utility services, particularly electricity and water, show variation among cities. While Lisbon offers faster electricity connection times, Ponta Delgada sees longer waits, and excavation permits for water services introduce further delays in some areas. These variations underscore the need for standardized access and greater efficiency to make essential services more consistent across Portugal’s regions.

Challenges in Business Location and Permit Delays

Business Location and Dispute Resolution face particular challenges, as the B-READY study reveals. The Business Location category suffers from issues like limited cadastral information coverage, limited digital services for building permits, and long wait times to obtain permits. Although Lisbon and Porto have established digital platforms for submitting and tracking permits, other cities still rely on partially digitized or in-person permitting systems, leading to operational inefficiencies. Moreover, environmental permit requirements and interoperability issues in land registration could be streamlined to enhance property transfers and construction approvals, making the process more accessible and reliable across cities.

Need for Judicial Reforms in Dispute Resolution

Dispute resolution stands out as a critical area for improvement to support a stable business environment. Portugal’s judicial system offers digitalized court processes such as e-filing and e-communications, but a lack of specialized commercial courts and varying litigation costs across cities present notable challenges. In Lisbon and Évora, it takes over two years for commercial cases to resolve, largely due to high caseloads and insufficient judicial staff, particularly among court clerks. Litigation costs also differ widely, mainly due to attorney fees. In Funchal, litigation costs 2.6 percent of the claim value, while in Porto, it can reach 11.8 percent. The study suggests increased transparency in judicial efficiency and judge appointments to bolster confidence, as further judicial reforms, especially in commercial litigation, could better support business needs across Portugal’s regions.

Business Insolvency Variability Across Regions

The study finds notable variation in business insolvency processing times and costs among regions, with larger cities facing delays due to heavy caseloads. In Porto, liquidation proceedings average 55 months, compared to 28 months in Lisbon, suggesting that administrative measures tailored to high-demand cities could expedite insolvency cases, allowing businesses to reorganize or liquidate more efficiently. Furthermore, the B-READY study highlights a need for specialized insolvency processes for small and medium-sized enterprises, currently absent from the framework, which could support economic stability by providing companies more options to handle financial distress.

Path Forward for a Unified Business Climate

Portugal’s varied regional performance across business categories illustrates both achievements and areas for development. Porto leads in Utility Services and Business Location but ranks lower in Business Insolvency, whereas Faro excels in Dispute Resolution but falls behind in Business Location and Utility Services, with digital services for building permits less prevalent. The uniformly high Business Entry scores reflect Portugal’s harmonized regulations, which ensure an efficient process for new companies. The B-READY study underscores the need for a cohesive, digital approach to public services, regulatory processes, and dispute resolution, enabling Portugal to build a more business-friendly environment. Improving areas such as cadastral coverage, digital platforms, and judicial processes can create a more unified business environment, supporting regional economic goals and empowering Portugal to pursue inclusive, sustainable growth.