The Exporters' Club recommends to the Government policies that increase Spain's attractiveness for investment

The Spanish Exporters and Investors Club, through a technical note approved by its Reflection Committee on Internationalisation, which includes experts from the academic, institutional and business worlds, recommends to the Government the development of policies designed in the short and medium term to attract foreign direct investment (FDI) to Spain in view of the current context of increasing international competition and in an environment of a possible decline in investment flows.  

According to the latest UNCTAD data, global FDI flows rebounded by 64% in 2021, to 1.58 trillion dollars, already surpassing pre-pandemic levels, which brought the global stock of FDI to an all-time high of 45.4 trillion dollars.  

However, as Marian Scheifler, managing partner of the specialist consultancy SIfdi and author of the technical note entitled "Trends in foreign investment and Spain's situation on the global stage" warns, greenfield investment (in new projects) remained below pre-pandemic levels in most sectors in 2021. "The trends in recent years point to a decline in the number of new projects," says Scheifler, who also points out that this trend is also reflected in the evolution of FDI received by Spain. 

In fact, although FDI in Spain in 2021 reached 21,957 million euros in net investment, and in the first half of 2022 it has already reached 15,660 million, surpassing the average of net investment flows in the last decade, which amounted to 18,846 million annually, there is an "increasing evolution of acquisition operations as a form of investment, much higher than reinvestment and/or expansion operations, or new investments in the total investment flows", explains Marian Scheifler.  

Thus, while acquisition transactions accounted for 53% of the total in 2021, new investments account for only 19%. "This trend has undoubted implications in terms of the policies that can be adopted in terms of FDI promotion and facilitation," she points out. 

According to the latest published data, referring to 2020, the Foreign Investment Register of the Secretary of State for Trade records more than 18,300 foreign capital companies active in Spain, responsible for 1.7 million direct jobs, 8.8% of the employed population and a turnover of 502,904 million euros.  

Furthermore, despite representing only 0.5% of active companies in the country (1% if we refer only to industrial companies), they contribute to 16% of the total number of people employed and generate almost 29% of the total turnover of companies in Spain. They are also responsible for 41% of Spanish exports in the industrial, commerce and services sectors (50% in the case of industry).  

In its report, the Committee for Reflection on Internationalisation highlights that foreign subsidiaries in Spain are also more resilient to economic cycles, as evidenced by data from 2020, the year of the pandemic. In that year, while 622,600 jobs were destroyed in Spain, according to the EPA, subsidiaries in the industrial and commercial sectors generated 17,691 new jobs associated with their activity compared to the previous year.  

The key to this greater resilience lies in company size: the average Spanish company has 6 employees, while foreign subsidiaries have 152 employees. "Size is also relevant when it comes to explaining differences in business productivity, due to their greater innovative capacity, access to technology and higher R&D expenditure". All this justifies, in short, that "the subsidiaries of foreign companies have withstood the crisis better than the average Spanish company in 2020", says Scheifler.  

The expert considers that, despite the procedure of control and prior authorisation of foreign investment decreed by the Spanish government in March 2020, in line with the actions of other developed countries, and which will remain in force in principle until 31 December, "it does not seem that so far it has been a hindrance to the dynamics of foreign investment in our country". 

However, she believes that the Spanish government should set itself the objective of boosting FDI, as Spain's economic growth depends to a large extent on the success of this operation. With this objective in mind, the Committee for Reflection on Internationalisation considers it necessary to define and build "the portfolio of priorities in relation to sustainable investment, that which meets ESG criteria (environmental, social and corporate governance) and generates wealth and employment for citizens". 

"Building and making this portfolio public not only positions Spain and its territories better in the international investment context, but also makes the execution of public funds predictable and more transparent and, therefore, accountability as a measurement mechanism for stakeholders", the note states, which also stresses Spain's need to "have ambitious sustainable foreign investment objectives". 

The Committee for Reflection on Internationalisation advocates that the policy of attracting investment should be dictated from the highest levels of government, "with a single voice and actively listening to foreign companies that are most committed to generating value in Spain", as in practice has been done by "France with its Choose France initiative or the UK's Office for Investment".  It also proposes that Spain should promote the development of programmes and platforms for the supply and demand of talent, with specialised services, such as those existing in other European countries and regions. 

Finally, in relation to the mechanisms of control and prior authorisation of FDI established by governments, "which are here to stay", the Committee for Reflection on Internationalisation considers that they must be compensated with incentives or "vitamins" for companies in order to improve Spain's attractiveness.