Integrated Economic Development Plan. Hon. Manuel A. Laboy Rivera Secretary, Department of Economic Development and Commerce

Transcription

1 Integrated Economic Development Plan Hon. Manuel A. Laboy Rivera Secretary, Department of Economic Development and Commerce

2 Frequently Asked Question 1 Where is Puerto Rico s Economic Development Plan? 2 How do we get more money to the treasury? 3 What are the specific measures to boost Economic Development? 4 Who is responsible for Economic Development? 5 What are we doing for SMEs? 2

3 Puerto Rico Economic Background 3

4 Evolution of the Economy of Puerto Rico in the Past 50 Years AGRARIAN ECONOMY INDUSTRIAL ECONOMY 1960 s 2000 s ADVANCED MANUFACTURING, SERVICES AND KNOWLEDGE ECONOMICS Sugar cane, tobacco, etc. Petro-chemical, electronics, needle, textiles, etc. Pharmaceuticals, medical devices, biotechnology, food, export services, etc. 4

5 Comparative Analysis of the Economic Models of Puerto Rico Present Federal incentives, cheap labor, preferential access to continental US markets, and low utility costs as major tools to attract foreign investment First the textile industries, then the petro-chemical, and then the pharmaceutical industries - all depended on importing almost 100% of the raw material Tax Incentives (+ zero federal income taxes - Section 933 Federal Internal Revenue Code) as the main and only tool to attract foreign investment. This is due to the loss of the 936 incentives. US Free Trade Agreements with other countries affected PR preferential access to the North American market. Our greatest competitive advantage = Tax Incentives Second competitive advantage = skilled, educated and bilingual labor force; Third = geographical location; Fourth = American legal system High dependence of manufacturing activity from foreign companies - little diversified economy; Local business class far below its potential; Tourism and agriculture with little impact on the economy Most tax incentives and subsidies are granted to large foreign companies High dependence on manufacturing activity by foreign companies with a slightly more diversified economy (ex. finance, banking, professional services and insurance) - agriculture and tourism with little impact on the economy; Innovation and entrepreneurship far below their potential Most of the contributory incentives and subsidies are granted to large foreign companies Import and export depend mainly on foreign companies Import and export depend mainly on foreign companies 5

6 Current Conditions and Economic Background (at real prices) Change 2006 to 2016 Gross National Product (GNP) -15.2% Gross Domestic Investment Government Consumption Expenditure -32.7% -16.7% INVETMENT IN: Machinery and Construction Equipment -12.6% -61.3% Personal Consumption Expense Economic Activity Index Net Income to the General Fund Non-Agricultural Wage Employment Participation Rate -3.0% -20.2% +7.4% -14.9% -17.3% Source: Planning Board, Financial Advisory Authority and Fiscal Agency of Puerto Rico, Department of Treasury and Visitor Profile Report of the Institute of Statistics 6

7 Economic Impact of Change in Population Levels Migratory Balance with the United States 2006 to 2015 (in thousands) Out In k people who do not return 89 Economy may experience economic growth even as its population declines Economic approach must be changed A more favorable environment for local companies should be created and PR must shift from being an importer to being an exporter Source: Community Survey, U.S. Census Bureau; Air Carrier Statistics, U.S. Bureau of Transportations; Cargo and Air and Sea Passengers, Ports Authority 7

8 Socioeconomic Welfare Conditions CHILDREN LIVING IN POVERTY CHILDREN WITH PARENTS WITHOUT JOB SECURITY CHILDREN LIVING IN HOUSES WITH HIGH COST OF HOUSING ADOLESCENTS WHO DO NOT ATTEND SCHOOL OR WORK Number of children 428,000 15,000,000 Puerto Rico 56% 58% Number of children 422,000 21,363,000 54% 57% Number of children 232,000 24,646,000 Number of adolescents 21,000 1,191,000 32% 31% % 11% Unites States 22% 21% % 29% % 33% % 7% Source: KIDS COUNT Data Book of 2017, Annie E. Casey Foundation 8

9 How does Puerto Rico compare with other jurisdictions? Economy Ease of Doing Business Starting a Business Dealing with Construction Permits Getting Electricity Getting Credit Paying Taxes Trading across Borders New Zealand Singapore United Kingdom United States Germany Ireland Portugal Spain Mexico Colombia Peru Puerto Rico Chile Costa Rica Panama Uruguay Indonesia Dominica Argentina Source: The World Bank Group, Economy Rankings

10 Economic Approach for the Future of Puerto Rico 10

11 How can more money enter the economy? For an economy that does not control its monetary policy, there are 4 main mechanisms to raise funds EXPORTS INVESTMENT FEDERAL FUNDS CREDIT Fostering the flow of funds and maximizing their multiplier effect through capital reinvestment and the consumption of local products and services are the necessary mechanisms to revive the economy and create new jobs. 11

12 Socioeconomic Development - Vision Productivity is necessary to compete in the global economy and value added is the activity that differentiates our products and services. Stability and representativeness on an equal basis with the other States - necessary to reach our potential as a people. Fiscal responsibility and transparency are fundamental to a healthy, effective, efficient and participative government. Science, technology and innovation are critical for the modernization of our economy and our institutions. The model is based on the development and protection of the human resource, including security, education, health and social services. Public Policy Tools Setup Planning & Budget Statistics Results 12

13 Main Components of Economic Development We have to transform Puerto Rico's education to foster a maximum level of innovation & technology that enables us to be globally competitive and thus reach the desired level of local, national and foreign investment that allows the export of goods and services. 13

14 Main Components of Economic Development Transformation of the educational system, K-12, university level, and professional level (certifications and continuing education) to be one of excellence and embrace innovation and creativity. Attract private investment capital where our creative minds, our ecosystem of innovation and our human talent are our true main incentives. INVESTMENT EDUCACION EDUCACION EDUCATION INNOVATION & EDUCACION TECHNOLOGY Encourage innovation, technology and the export of products and services with high creative content and added value where universities - public and private - are the main axes of sustainable economic development of the Island. EDUCACION COMPETITIVENESS Establish the best climate for doing business in Puerto Rico, both to create local businesses and to attract foreign investment. Promote the creation of local companies that are based on values of productivity and competitiveness. 14

15 Education: System Transformation and Skills Promotion We believe that the education system is an essential component and is key for economic development, so we need to continually calibrate and align curricula and teaching methodologies to ensure that they address the needs of local and international industries, and that we help professionals in the work force to reinvent themselves, as they need. K e y I n i t i a t i v e s i n E d u c a t i o n 1 Puerto Rico Online Campus 2 Bilingualism: Key to Success 3 STREAM: Science, Technology, Reading, Engineering, Arts, and Mathematics 4 Re-focus of the University of Puerto Rico (UPR) 5 Internationalization of University education 15

16 Innovation: Solid Ecosystem for Entrepreneurship In order to establish a healthy and sustainable ecosystem of innovation it is fundamental that the projects of entrepreneurship respond to the needs of the market. T e c h n i c a l A s s i s t a n c e Market Needs Applied Research Incubators Startups Accelerator Startups Commercialization Substitution of Imports of Goods and Services F i n a n c i a l A s s i s t a n c e 16

17 Innovation: Economic Impulse Initiatives - Pilot Projects 17

18 Innovation: Natural Energy Laboratory of Hawaii Authority (NELHA) First true closed-cycle OTEC plant connected to a U.S. electrical grid. Inaugurated in 2015 Represents a major achievement for Hawaii, the U.S., and marine renewable energy. Generates clean, renewable electricity that is available 24 hours a day, 365 days a year. The NELHA-sited plant generates 100 kilowatts of sustainable continuous electricity enough to power 120 Hawaii homes annually. OTEC Efforts & Activities Hawaii Puerto Rico University program(s) University of HI Si No Research centers HI Natural Energy Institute HI National Marine Renewable Energy Center Natural Energy Laboratory of HI Authority Science & Technology Park Si No Pilot Plant (100 kw connected to the grid) Si No Federal & State Permitting Roadmap/Guide Si No Site-Specific Environmental Impact Assessment Si No PPA Negotiations with State Power Utility Si Si No 18

19 Competitiveness: Structural Reforms 1 Structural Reforms Labor Permits Tax Energy 2 Eliminate Requirement for Electronic Export Information (EEI) Elimination of the federal requirement for export, achieving an equal treatment in order for transactions to and from the Island be more agile at a lower cost. 3 Culture of Transparency and Prevention of Corruption (FOIA) Public access to financial and operational information of the PR Government in a transparent manner to promote economic development. 4 Incentives Code Consolidates and rationalizes all economic incentives in a single code. Establishes a uniform process for granting incentives. Focus the resources on the incentives with Return of Investment 19

20 Investment: Strategic Approach INCENTIVES CODE INCENTIVES CODE New DDEC Invest Puerto Rico (IPR) Entity will promote Puerto Rico as an investment destination, organizes the efforts of private sector promoters and focuses on attracting new businesses to Puerto Rico IPR Link between external capital and local businesses Science, Tech, and Research Trust Link between external investment and local companies with innovation and technology DMO Destination Marketing Organization (DMO) Entity will manage the marketing and promotion of Puerto Rico as a destination of the visitor's economy. 20

21 Investment: Tools and Opportunities Federal Programs State Initiatives Investment Opportunities New Market Tax Credits Invest Puerto Rico Public Private Partnerships EB-5 Program Destination Marketing Org. (DMO) Science City Foreign Trade Zones Insert PR in US treaties to avoid double taxation Incentives Code Asset Map Infrastructure Plan Roosevelt Roads Redevelopment Port of Las Americas 21

22 Investment: Potential Projects with Public Private Partnerships Receiving Terminal (CGL) Natural Gas Project in Palo Seco Natural Gas Project San Juan Liquefied Petroleum Gas Comprehensive Cancer Center Infrastructure Asoc. PR-52 Extension to Aguadilla Concessions and Contracts of Operations / Maintenance Regional Airports Concessions and Contracts of Operations / Maintenance Regional Airports Waste Decomposition Plant Pilot Projects of Hydrogen Generation for Fuel Cells Vehicles Pilot Projects of Hydrogen Generation for Fuel Cells Vehicles Compressed Natural Gas Liquefied Petroleum Gas New Natural Gas Plant in Costa Sur Pilot Projects of Hydrogen Generation for Fuel Cells Vehicles Over 50 renewable energy projects under the Puerto Rico Electric Power Authority (PREPA) evaluation Compressed Natural Gas Natural Gas Project in Aguirre Plant 22

23 Investment: Asset Map 23

24 Investment: Asset Map 24

25 Strategic Areas for Economic Development Advanced Manufacture 1 Bio Economy 7 2 Emerging Industries Aerospace 6 EDUCACION 3 Technology Visitors Economy 5 4 Export of Goods and Services 25

26 Programmatic Commitments of Economic Development by Strategic Area ADVANCED MANUFACTURE EMERGING INDUSTRIES TECHNOLOGY EXPORT OF GOODS AND SERVICES VISITORS ECONOMY AEROSPACE BIO ECONOMY National Network of Manufacturing Innovation Manufacturing USA Select USA Permanency of Section 199 of the Federal Internal Revenue Code Industrial Hemp Medicinal Cannabis Impulse to Puerto Rican Cinema Sharing Economy Creative Economy Thermal Ocean Energy and Deep Water Industries Innovation and Technology Economic Impulse Center for Software Development & Info Technology Maximize Export Services Federal Contracting Center Hub Zones Cultural Entrepreneurship Medical tourism Ecotourism Development Sports Tourism Districts of Tourist Interest Cruise Industry Aeronautics and Aerospace Institute of PR Recycling of Used Oils and Community Businesses Development of Raw Materials Applied Research Center Bio-Fuel Energy Microalgae Energy Production 26

27 SMEs: Areas of Opportunity and Roadmap Advanced Manufacture 1 Bio Economy 7 2 Emerging Industries Aerospace 6 SMEs 3 Technology Visitors Economy 5 4 Export of Goods and Services 27

28 SMEs: Programmatic Commitments for Economic Development A d d i t i o n a l I n i t i a t i v e s Innovative SMEs Designation of 10% of the Special Fund for Economic Development (FEDE) to provide contributory incentives to SMEs that foster innovation in economic sectors. Master Entrepreneurship Business Intelligence and Entrepreneurship System Entrepreneurship in Functional Diversity population Maletín Empresarial de la Mujer Program focused on supporting those Puerto Rican women who wish to develop in the business world mainly in the areas of technology and innovation. From School to Business SME Food Sector 28

29 Does this answer the initial questions? 1 Where is Puerto Rico s Economic Development Plan? 2 How do we get more money to the treasury? 3 What are the specific measures to boost Economic Development? 4 Who is responsible for Economic Development? 5 What are we doing for SMEs? 29

30 CONTACT US 355 Ave. Roosevelt Hato Rey, PR P.O. Box San Juan, PR PHONE: