Portugal looms large in the consciousness of Hong Kong, largely because its former colony, Macau, has long served this territory as a charming getaway.

Macau has been handed over to Chinese rule, but Portugal retains its trading links with Hong Kong, a relationship that has enormous potential for growth.

Today, Hong Kong traders do well out of Portugal - rather too well from Lisbon's point of view. The trade imbalance is huge - US$102.6million ($796million) in Portuguese exports to Hong Kong against US$182.8million in Hong Kong exports to Portugal.

'Unfortunately, with most of our trading partners we have a negative balance, but we are trying to change that,' he said.

Portugal's No1 exports to Hong Kong are electronic integrated circuit boards. In 2004 it only sold US$312,000 worth of them to the territory before the sector soared in 2005 to US$30.1million. This was clearly a one-off anomaly, ascribed to extraordinary deals in an extraordinary year for circuit boards.

The next-biggest Portuguese exports to Hong Kong are mobile phones and radiotelephony gear, rising from US$15,123 in 2004 to US$22,060 in 2005. Next by volume are electrical capacitors, which suffered a fall from 2004 to 2005 from US$11,660 to US$10,394.

Going the other way, Hong Kong exported parts for radiotelephony equipment, a sector whose volume rose from US$12,104 in 2004 to US$20,521 in 2005. No 2 by volume were printed circuits, rising from US$9,141 in to 2004 to US$18,013 in 2005. The next-biggest exports to Portugal from Hong Kong were scale models and puzzles, which increased from US$10,488 in 2004 to US$11,565 in 2005.

The trade imbalance and other problems have alarmed the Paris-based Organisation for Economic Co-operation and Development, which notes that Portugal's domestic economy has been lagging since 2000 and recommends reform policies, a view echoed by the European Union.

'I would agree that we are going through a difficult stage in the economy in Portugal, particularly on the budget side, with a big deficit which is not complying with the EU instructions to member states. But the government is taking measures to cut red tape and to halt the spread of bureaucracy,' Mr Moitinho de Almeida said.

He traced these difficulties to the 1974 revolution in Portugal, when the dictatorship was overthrown and the country adopted labour laws among the most 'advanced' in the world.

'This is a delicate issue because there must be a balance between workers' rights and investors' expectations of profit.'

Another problem identified in the OECD's Portugal 2006 report was the high euro, which makes the exports from euro-zone countries less attractive.

'But with the euro, we have no leverage. We are trying to use a criteria in our hands to improve the performance of the workers and change labour laws so productivity can increase.'

He said he was proud of Portugal's standing in the increasingly competitive wine industry, having taken third place behind France and Australia in London's International Wine Challenge 2006. This honour was then followed by a strong showing in Hong Kong's Vinexpo 2006 last month, when Portugal exhibited more wines than ever before.

Further evidence of growing investor confidence in Portugal comes with news that telephone giant Vodafone Group's Centre for Excellence will be established in Lisbon. Ikea has also announced plans to build a Euro32million ($321.8million) plant, creating 220 jobs in northern Portugal.

True to its globalising spirit, Portugal's national day is linked to world travel - and indeed to the Pearl River Delta.

June 10, 1580, marks the death of the poet adventurer Luis Vaz de Cam?es, whose work has been compared to Homer and Shakespeare.

What connects Cam?es to our part of the world is his epic work Os Lusiadas, based on his odyssey to and from Macau, where he arrived in 1556 as an officer.

Homeward bound in 1558 he was shipwrecked and lost his Chinese girlfriend, although he managed to save his manuscript. He was then waylaid in Mozambique and only got to Lisbon in 1570.

From this adventure he completed his epic work, which so touched the nation's heart that his death on June 10, 1580, was forever marked as Portugal's national day.

Portugal

Population

10.6 million

Capital

Lisbon

Ethnic groups

Mainly Portuguese, with minorities of recent East European immigrants and citizens of African descent who immigrated during the decolonisation process

Cristiano Ronaldo

Santa Maria da Victoria Monestary

Language Portuguese

Religions

Roman Catholic Christian 94%

GDP US$204.4 billion

Climate: maritime temperate; cool and rainy in north, warmer and drier in south

Head of state

Anibal Cavaco Silva (President)

Head of government

Jose Socrates (Prime Minister)

Natural resources

Cork, timber, grain, potatoes, tomatoes, olives, grapes, sheep, cattle, goats, pigs, poultry, dairy products, fish

Key trading partners

Spain, France, Germany, Britain, Italy, United States, Netherlands

Major industries

Textiles, paper, footwear, chemicals, metal working, oil refining, fish canning, rubber and plastic products, IT, ceramics, wine, tourism