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    Madrid Madrid Presentation Transcript

    • SPAIN & THE FDI: From net borrower to net creditor Matilde Madrid ( [email_address] ) Vienna, March 7th 2008
    • SPAIN & THE FDI: From net borrower to net creditor
      • Spanish position in the World’s FDI
      • Inward FDI
        • Factors
        • Effects
      • Outward FDI
        • Factors
        • Effects:
          • Employment and production
          • Trade
      • Concluding remarks
    • 1. Spanish position in the World’s FDI
      • Inward FDI:
        • Attractive host (late 80’s, early 90’s)
        • More competition in 00’s (emerging countries, EU enlargement)
      • Outward FDI:
        • FDI inflows => Outward looking orientation of the Spanish economy
        • 2006: Outward FDI stock (41% of Spanish GDP)
        • 2001-2006: 6% of total world outflows
    • 2. Inward FDI (I): Factors
      • Why did Spain attract FDI in the late 80’s/early 90’s?
        • EC accession, big market, link to Latin America, lower Unit Labour Cost
      • Why does not Spain attract so much investment today?
        • Higher competition in world’s FDI (emerging economies) and in the European Union (EU enlargement)
    • EMPLOYMENT The inward stock of FDI in 2005 generates 1,3 million jobs (direct employment) in Spain, which mean 7% of the total employment. 2. Inward FDI (II): Effects GROSS FIXED CAPITAL FORMATION Inward FDI has traditionally contributed to gross fixed capital formation. In 2000 the FDI inflows meant around 25% of the total Gross fixed capital formation.
    • 2. Inward FDI (III): Effects
      • EXPORTS AND
      • OPENNESS
        • Inward FDI =>
        • Exports and
        • internationalisation
      • BALANCE OF PAYMENTS
        • Traditionally key to finance Spanish current account (30-40% of total capital inflows) not so much today (around 10%)
      • To sum up, these inflows had an impact on domestic economy, fostering investment, growth and productivity and creating a more dynamic market, less home-biased. These fundamentals paved the way for a further phase in the internationalisation process: the outward FDI.
      2. Inward FDI (III): Effects
    • 3. Outward FDI (I): Factors
      • Why is Spain a big player in world’s FDI since the mid 90’s?
        • Inward FDI => Outward FDI
        • Other factors:
          • macroeconomic stability, €
          • Liberalisation/privatisation internal market and abroad
          • M&A’s
    • Outward FDI (II): by COUNTRY
      • First wave of Spanish foreign investments: Latin America (97-00)
        • Privatisation/ liberalisation in utilities, energy, financial and telecommunication services
        • Cultural linkages
      • The second wave of Spanish investments: Europe
        • The €
        • M&A’s
        • EU enlargement
        • Macroeconomic and institutional instability in Latin America
      Source: Own calculation based on Bank of Spain data Source: Own calculation based on Bank of Spain data
    • 3. Outward FDI (III): Effects (local economy)
      • Manufacturing sectors which invest abroad don’t worsen their local indicators:
        • Chemicals, food industries, non metallic minerals, basic metals, machinery…
      • Manufacturing sectors which perform worse aren’t affected by capital outflows:
        • Textiles, wearing apparel, footwear, communications equipment, computing mach...
    • 3. Outward FDI (IV): Effects (local economy)
      • Domestic indicators do not resent in services, though sizeable capital outflows:
        • Transport and telecommunications, real state and business services
      • FDI in services ≠ FDI in manufactures
    • 3. Outward FDI (V) : Effects (service trade)
      • Why does FDI boost service exports? Intrafirm trade
      • Market share: the best indicator for competitiveness
      • Service exports: increasing a lot from mid 90’s
      • Spain is strengthening its role in world’s FDI (4%) and trade in services (3%)
    • 3. Outward FDI (VI) : Effects (service trade)
      • In which countries is Spain bolstering its competitiveness?
      •  Especially in UK, the Spanish FDI main host recently.
      • In which sectors is Spain improving its competitiveness?
      •  Business services, royalties, computer & information services
      •  Spanish is still very far from leaders in FDI and service trade (USA, UK)
    • 4. Concluding remarks
      • Spain: from net FDI borrower to net FDI creditor
      • Inward FDI effects?
        • Competitiveness, exports, productivity
        • Inward => Outward?
      • Outward FDI effects?
        • Trade in merchandise and services? Positive effects
        • Does outward FDI have costs in employment?
      • CONCLUSIONS
      • FDI inflows can create more outward-oriented economies
      • FDI outflows may contribute to higher exports.
      • FDI outflows do not imply job losses
      • POLICY IMPLICATIONS
      • Policies for companies investing abroad.
      • Pro-active policy for FDI In Spain: INTERES Agency ( Invest in Spain)
    • ANNEXES
    • The Spanish outward FDI: by SECTOR
      • Energy industries lost importance during the second expansion
      • In favour of construction, real-state and business activities.
      • Future: high expectations in the renewable energy sector.
      Source: Own calculation based on RIE data (EUR milions) Net investment including SPE
    • The Spanish service exports: by COUNTRY
      • Are service exports linked to outward FDI? Yes
        • Europe: main service exports destination ( ~ outward FDI)
        • Latin America: sizeable share (close to 10%)
        • From 99-00 to 04-06: Europe increases its weight in service exports to the detriment of Latin America and North America
      • Are service exports linked to outward FDI? Yes but…
        • There more factors which hold sway over service exports (growth…)
        • Changes in service export patterns are smoother than changes in FDI patterns
      Source: Own calculation based on EUROSTAT data
    • Services involved in intrafirm trade
      • Main sectors involved in intrafirm trade?
        • Royalties, business services, R&D…
      • United States: big surplus in intrafirm trade:
      •  Specially in royalties, R&D, business services
      •  Deficit in consulting and computer services
      •  Spanish competitiveness is very far from USA in services related to intrafirm transactions (Graph X)
      •  Specially in royalties
      •  Surplus in computer services
      •  High weight in business services