Foreign Investment in the Barcelona and Catalonia area

LIBRARY OF CATALONIA (BIBLIOTECA DE CATALUNYA) CIP INFORMATION

Foreign investment in the Barcelona area and CataloniaI. Carranza, Isabel, ed. II. Rodríguez, Imma (RodríguezLópez), ed. III. Diamante, Giulia, ed. IV. ACC1Ó V. Barce-lona. Sector de Promoció Econòmica1. Inversions estrangeres – Barcelona 2. Inversions es-trangeres – Catalunya339.727.22(467)

FOREIGNINVESTMENT INTHE BARCELONAAREA ANDCATALONIA

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EDITIONBarcelona City CouncilEconomic Promotion sectorLlacuna 162, 1st floor08018 - Barcelona - SpainT. +34 93 256 39 [email protected]

Government of CataloniaACC1Ó Invest in CataloniaPasseig de Gràcia, 12908008 - BarcelonaT. + 34 93 476 72 [email protected]

PricewaterhouseCoopersPablo López RomeroElena Casas Martínez

COORDINATIONIsabel Carranza - Barcelona City CouncilImma Rodríguez - Invest in Catalonia - ACC1ÓGiulia Diamante - Planning and analysis - ACC1Ó

DESIGNIndex

PRINTINGCevagraf, S.C.C.L.

D.L.:Barcelona, November 2009No. of copies: 2,000

Dynamic and open, enterprising and cosmopoli-tan, Barcelona has always been a city that welco-mes foreign investment. The city has a densemetropolitan area full of vitality, and Barcelona’seconomy is characterized by the diversification ofactivity with a strong industrial base and a predo-minant services sector. The city’s objectives in-clude actively maintaining this economicdiversification, adapting to new demands andmeeting new challenges to stay attractive andcompetitive in a globalized world.

Over the centuries, the city has continually rein-vented itself to adjust to the needs of each periodand open itself to the world. With its long indus-trial tradition, Barcelona is now focusing stronglyon the knowledge economy and sustainability,based on the solid advantage of its unbeatable lo-cation as the southern gateway to Europe and theMediterranean. It is an attractive city due to its bu-siness development, entrepreneurial initiatives, in-ternational talent, leading research, boundlesscreativity and quality of life, which has earned theadmiration of the entire world.

The Barcelona metropolitan area has a popula-tion of 4.9 million and an area of 3,236 km2. Itsconsiderably diversified business communityhas a long industrial tradition and provides avery attractive location for foreign investment.Barcelona was recently named the headquartersof the Secretariat of the Union for the Mediterra-nean, a fact that will strengthen the city’sleadership in this area even more and attractleading companies interested in benefiting fromnew business opportunities.

More than 2,700 foreign companies are currentlyoperating in the Barcelona area. These companieshave shown their loyalty to the area by stayinghere and consolidating their presence through re-newed investments. More and more companieswith a vision of the future are choosing Barcelonaas the location of their business, as shown by thehigh rate of satisfaction of the foreign companiesoperating here. The companies established in thecity frequently make new investments to focuson strategic growth in activities of increasedadded value.

Attracting foreign investment to the Barcelonaarea, as presented in this fifth edition of the study,is a key aim of the public administration to createloyalty and increase inflows of foreign investment.Today Barcelona’s objective is to focus firmly anddecisively on a model of economic growth basedon innovation, creativity and the knowledge eco-nomy. Barcelona wants to continue to be knownfor its proactive support of talent and creativity, itsopenness to new economic activities, and its driveto increase the quality of life of its inhabitants.

Jordi HereuMayor of Barcelona

I am pleased to present the 5th edition of thestudy "Foreign investment in the area of Barce-lona and Catalonia”, which is jointly developed,biannually, by Invest in Catalonia - ACC1Ó and theEconomic Development Area of the BarcelonaCity Council. Certainly, foreign investment in ourcountry, and the opinion of businessmen about it,are key aspects that contribute to improve thecompetitiveness of Catalan companies and, ulti-mately, of Catalonia.

The strategic location of our country in southernEurope, the quality of life we enjoy and our entre-preneurial spirit, are factors that make Cataloniaone of Europe's most attractive areas for foreigninvestment. The fact that more than 3,000 foreigncompanies are established and generate a totalflow of foreign direct investment of 3,458 millionEuros, in 2008, confirms the ability of Cataloniaand Barcelona to attract high value-added foreigninvestment and international talent.

Despite the current situation, where the worldeconomy has experienced a setback due to thefinancial crisis and, in turn, the competition isincreasing globally, Catalonia has to make aneffort to remain an attractive destination forforeign investment, maximizing the advantages ofhaving a diversified business network andcompetitive service providers, along with humanresources with high technical skills.

In addition to maintaining the traditional foreigninvestment, Catalonia has to carry on with itsproductive model transformation process andlead the foreign investment attraction of emerging

sectors and countries. Knowledge-intensive andhigh value-added activities take a special impor-tance in business growth strategies for compa-nies and represent, at the same time, a factor ofcompetitiveness to attract and retain foreign in-vestment. The availability and investment inscientific and technological infrastructures, toge-ther with policies and government incentives forresearch and development, become some of themost valued aspects by businesses when ma-king the final decision to establish in our territory.

I am confident that Catalonia is prepared to facethe challenges of globalization and technologicalchange and, at the same time, it is able to makethe most of the opportunities created by the cu-rrent situation. The Catalan government, aimed atencouraging the development of new businessprojects, will develop further cooperation with theprivate sector to support the growth of our terri-tory, thereby ensuring the welfare of all citizens.

Josep Huguet i BioscaMinister of Innovation, Universities

and Enterprise

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INDEXFDI IN EMERGING INDUSTRIES INCATALONIA: ATTRACTING TALENTAND REACHING CRITICAL MASS

5.1 The dynamics of the businesscommunity in emerging industries: a noteon local-global alliances

5.2 The role of clusters as generators of theeconomic activities

5.3 The competitive advantage of Cataloniaand the Barcelona area in terms of FDI inemerging industries

5.4 Human capital

5.5 Access to financing: venture capital andpublic incentives

5.6 Other contextual factors

GEOGRAPHIC ANALISYS OF FDI INCATALONIA

6.1 Europe and the United States

6.2 Asia

6.3 Mediterranean countries

6.4 Geographic comparison: critical points,challenges and opportunities

APPENDICES

7.1 Methodology of the study

7.2 List of figures, tables and graphs

7.3 Sources

7.4 Glossary of terms

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MAIN CONCLUSIONS OF THE STUDY

INTRODUCTION TO THE STUDYAND THE ECONOMIC CONTEXT

2.1 Introduction to the study

2.2 Methodological approach andconceptual framework of the study

2.3 Opportunities of FDI for Catalonia inthe context of world economic change

CURRENT SITUATION OF FDI INCATALONIA AND THE REST OF THEWORLD

3.1 Current situation of FDI in the world

3.2 Increased competition to attract FDI

3.3 Current situation of FDI inCatalonia and the Barcelona area

TRADITIONAL FDI IN CATALONIA:CONCENTRATED AT KEY POINTSALONG THE VALUE CHAIN

4.1 The situation of the businesscommunity in mature industries: thefocus on activities with high addedvalue and knowledge intensive activities

4.2 The business model of companies inmature industries: the R&D&i opportunity

4.3 The competitive advantage ofCatalonia and the Barcelona area interms of traditional FDI

4.4 Human capital

4.5 Other contextual factors

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01MAIN CONCLUSIONSOF THE STUDY

The results of the fieldwork, discussion groups, interviewswith relevant actors and the analysis of different databasesspecializing in FDI have made it possible to collect the mostoutstanding perspectives on the current and future situationof FDI, the challenges facing the Barcelona area and Catalo-nia in terms of competitiveness and the factors that make usoptimistic about positioning Catalonia as one of the mostattractive locations for investment in coming years.

01Catalonia and the Barcelona area lead therankings of the most attractive places todo business. However, the reduction in thevolume of FDI at the global level in the lastyear has resulted in greater competitionbetween regions interested in attracting,consolidating and maintaining investments.

02Strategies to promote the competitive-ness of Catalonia and the Barcelona areaare being implemented in a context ofgrowing competitiveness at the worldlevel and within a framework of change inproduction models at the local level. Inthis regard, different lines of action areemerging:

• Maintaining traditional FDI in mature in-dustries while focusing on added-valueand knowledge-intensive activities.• Attracting and consolidating FDI in NewEconomy industries and entrepreneurship.

Catalonia and the Barcelona area have a bu-siness community of mature industrieswhere the focus is on R&D&i, technologyand logistics. These industries should repre-sent the seed for attracting and consolidatingFDI in emerging industries such as biotech-nology, renewable energies and ICTs.

To favour this approach, public administra-tions can impact competitiveness factors atthe local level, particularly with regard to in-frastructure, human capital, access to fi-nancing, the regulatory framework andquality of life.

1003More than 3100 foreign companies areoperating in Catalonia, with a total flow ofFDI of €3.45 billion in 2008.

The Barcelona area accounts for about75% of the FDI projects in Catalonia onaverage and accounted for 87% in 2008.

In the last 5 years, projects connected toICTs have represented more than 20% ofthe total and, together with services forcompanies and consumer products, theyrepresent 50% of the FDI projects imple-mented.

04In mature industries, R&D&i constitutes astrategy for increasing business, as wellas a competitive factor for attracting andmaintaining FDI in the Barcelona area andCatalonia. In 2008 industrial investment in-creased by 2.2% and 38% of all FDI receivedby Catalonia was earmarked for industry. The-refore, Catalonia’s aim of maintaining pro-duction should also help increase R&D&iactivities in mature industries.

05The competitive advantage of Cataloniaand the Barcelona area regarding traditio-nal FDI stems from:

• The technical training of human capital.75% of foreign companies in mature indus-tries consider the level of technical personneland university graduates to be high or veryhigh.

• Policies and incentives related to R&D&itogether with investment in scientific in-frastructures.

• Access to high-capacity transport and lo-gistics infrastructure. 63% of foreign com-panies in mature industries that participatedin the study said that the level of infrastruc-ture and accessibility was acceptable.

• Public-private sector cooperation.

06FDI in emerging industries in Cataloniaand the Barcelona area is consolidatingNew Economy industries such as biotech-nology, renewable energies and ICTs inclusters designed to attract a critical massof investment and entrepreneurial talent. In biotechnology, the Barcelona area is beco-ming an international benchmark for the cre-ation of new companies, with a growth rateof 30%, which is higher than the Europeanaverage.

07The competitive advantage of Cataloniaand the Barcelona area regarding FDI inemerging industries stems from:

• The availability of technological infras-tructure 59% of the foreign companies inemerging industries consulted said the tech-nological infrastructure in Catalonia was ac-ceptable.

• The existence of a network of relatedcompanies at the local and global levelsand service providers.

• An attractive lifestyle for qualified pro-fessionals and international entrepre-neurs. 90% of the companies in emergingindustries that participated in the study saidthey were satisfied with the cultural, sportsand leisure activities available in the Barce-lona area and Catalonia.

• The public administration helps developnew business projects.

08The human capital available in the Barce-lona area and Catalonia constitutes a com-petitiveness factor in its own right. 87% ofthe companies consulted said they weresatisfied with the level of university quali-fications and technical training. This is alsoan area in which the public administrationcan have an impact by creating synergiesbetween the business community andacademia.

09European and North American companiesemphasized a set of opportunities for theBarcelona area and Catalonia that can helpincrease the attractiveness of the region:

• Support from the public sector for thedevelopment of the New Economythrough initiatives aimed at the most rele-vant factors for companies from theseregions that invest in industries such asbiotechnology, nanotechnology, etc.

• Focusing on the values of entrepreneurshipand international exchange as a differentia-ting and positioning factor in Europe.

• Providing and spreading information onavailable services and incentives to foreigncompanies in the process of setting up inCatalonia.

10Asian companies highlighted the compe-titive advantage of Catalonia that plays apart in the investment decisions of Asiancompanies in this area:

• The existence of a competitive businesscommunity that offers support and providesthe services these companies need for theiractivities is a highly important factor for then.More than 80% of the Asian companies par-ticipating said they were satisfied or very sa-tisfied with the level of concentration ofcompanies in related industries.

• The availability of information on the thingsthat make Catalonia and Barcelona standout in terms of work culture, values, theinvolvement of the public administration inthe business climate, etc., due to theirperception of Europe as a homogeneousunit.

• The dissemination of successful cases ofbusinesses launched with Asian capital toprovide references for new investors.

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MAIN CONCLUSIONS

02INTRODUCTION TOTHE STUDY AND THEECONOMIC CONTEXT

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FOREIGN INVESTMENT IN THE BARCELONA AREA AND CATALONIA • INTRODUCTION TO THE STUDY AND THE ECONOMIC CONTEXT

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Barcelona City Council’s Area of InternationalEconomic Promotion and Invest in Catalonia (Ca-talan Government - ACC1Ó) have prepared thefifth edition of the study “Foreign Investment inthe Barcelona Area and Catalonia” with the co-llaboration of PricewaterhouseCoopers.

Unlike the previous edition, which came out inJune 2007, this one has been issued in a climateof uncertainty for foreign direct investment (FDI)and for the economies of Catalonia and the world.With this in mind, the study focuses on the featu-res of the Catalan economy that have made Cata-lonia and the city of Barcelona a model for theentire world when it comes to attracting businessprojects and flows of FDI from all over the world.

Despite the current economic situation, the trendsthat have been prevalent in recent years are stillvalid regarding industrial production, the shift ofthe most advanced economies towards the NewEconomy and the organization of the economy incomplex networks.

With all these factors in play, positioning the eco-nomy of the Barcelona area (and, by extension,that of Catalonia as a whole) as an attractiveplace for FDI represents a real challenge for thefuture, as well as a wealth of opportunities. Asdiscussed in different sections of the study, inthe immediate future Catalonia has to make itscapacity to maintain the level of inflows of FDI inso-called traditional industries compatible withthe strong push it must give to the emerging in-dustries that are expected to drive the world eco-nomy in coming years.

With regard to the study, ACC1Ó and BarcelonaCity Council’s Area of International Economic Pro-motion decided to make a drastic change in theirmethodological approach and structure. The mainpart of the study has the following sections:

• An initial section that presents the main con-clusions of the study, with a breakdown of theCatalan economy’s strengths and potential forgrowth and as an attractive destination for FDI.

• A statistics section with the main macro-econo-mic figures of the current and recent context ofFDI in Catalonia and the world, as well as thedefining features.

• A section dedicated to traditional FDI in Cata-lonia, which is understood to mean FDI targetedat companies in mature, consolidated industriesand FDI from countries with a long-term presencein Catalonia. In this section, the emphasis is onthe main challenges of consolidating investmentand the points on the value chain that will be themost important in coming years: research anddevelopment and innovation (R&D&i), logisticsand distribution.

• A section dedicated to FDI in emerging indus-tries in Catalonia, especially in New Economy in-dustries that are expected to play a key role in thefuture of Catalonia and the rest of the world,especially biotechnology, renewable energies andinformation and communication technologies(ICTs). Special attention is paid in this section tothe concept of international entrepreneurship.

• The last section, which is on the geographicanalysis of FDI in the Barcelona area and Cata-lonia, discusses the investments made by coun-tries with an historic, consolidated presence inCatalonia and those that have a growing impor-tance in the Catalan economy, especially Asianand Mediterranean countries. Finally, the definingfeatures and different opportunities of theseregions are compared.

2.1Introduction to the Study

2.2Methodological Approach and Conceptual Framework of the Study

According to the register of foreign companies inCatalonia, there are more than 3,100 foreign com-panies operating in Catalonia that representapproximately one third of the foreign companiesin Spain1. In terms of geographic concentration inCatalonia, approximately 90% of foreign compa-nies are located in the Barcelona area. For the pur-poses of this study, the Barcelona area isunderstood to be the Barcelona metropolitanarea, which covers the administrative limits of thecity, plus the 7 counties that surround it: Barcelo-nès, Maresme, Garraf, Baix Llobregat, VallèsOriental, Vallès Occidental and Alt Penedès.

The study on FDI in Catalonia is based on an uni-que conceptual framework developed for thisedition that adapts to the structure of sectionspresented in the past. This conceptual frameworkis based on the hypothesis (see Figure 1) thatdifferent kinds of FDI can be defined based on thelevel of maturity of the production industries andthe companies operating in the region. Each kindof FDI can be associated with a main objective, aswell as a specific focus of action. These differentassociated strategies basically seek to increasethe amount of FDI projects and flows throughoutthe region.

1 By July 2009, a total of 3124 companies had been surveyed.Invest in Catalonia.

FIGURE 1. FDI CONCEPTUAL FRAMEWORK

NOTE: “Local level” is understood to mean the opposite of “global”, i.e. the area under study: the Barcelona area and Catalonia.Source: Prepared by PwC.

GLOBAL CONTEXTUAL FACTORS RELATED TO FDI> Development of global macroeconomy> Development of global FDI inflows and outflows> Strategies used by Catalonia’s competitors to attract and maintain FDI

LOCAL CONTEXTUALFACTORS RELATED TO FDI

> ROLE OF PUBLIC ADMINISTRATION

> HUMAN CAPITAL

> ACCESS TO FINANCING

> INFRASTRUCTURE

> REGULATORY FRAMEWORK

> SERVICES AVAILABLE AND QUALITY OF LIFE

> BUSINESS CLIMATE

KINDS OF FDI

TRADITIONAL

EMERGING MARKETS

INTERNATIONAL ENTREPRENEURSHIP

MAIN OBJECTIVE

MAINTAINING

ATTRACTING ANDCONSOLIDATING

ATTRACTING

FOCUS OF ACTION

CONCENTRATION ONKEY POINTS ONVALUE CHAIN

REACHING CRITICALMASS

TALENT

MOREMATURE

LESSMATURE

LEVEL OF MATURITY OF PRODUCTION IN

DUSTRIES

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• In-depth interviews with 8 facilitating agents, including chambers of commerce, foreign con-sulates and other reference institutions in the area of FDI.These agents were included to provide a contrast with the working approach and to highlight thefactors that make FDI in Catalonia different.

• The organization of discussion groups in the form of industry and geographic workshops,which involved arranging them in two large groups, depending on whether they representedFDI in traditional or emerging industries and markets. A total of 6 workshops were organized withthe presence of 45 companies:

FDI IN TRADITIONAL INDUSTRIES 1. Point on the R&D&i value chain: future trends and challenges2. Point on the logistics and distribution value chain: future trends and challenges3. Specific features of FDI from the United States and Canada

FDI IN EMERGING INDUSTRIES4. Specific features of FDI from Asian companies 5. Specific features of FDI in emerging industries6. International entrepreneurs

These discussion groups were structured as follows:

PART 1 Differences in the industries and geographic areas involved, such as:• The dynamic nature of the business community• The key factors for competitiveness of the economy in Catalonia and the Barcelona area• The focus on added-value activities• The role of clusters• Experiences in the area of public-private cooperation

BOX 1. ABBREVIATED METHODOLOGY OF THE STUDY

PART 2Gathering primary data through questionnaires from participating companies, divided into thefollowing 8 contextual areas and a total of 32 variables, rated according to the level of impor-tance and the current level of satisfaction:• Investment context• Investment costs• Human capital • Work culture• Infrastructure• Available services • Legal and tax framework• Financing

• Personal interviews at companies to complement the discussion groups and carry out casestudies.

Finally, the analysis of secondary data wasmaintained from previous editions that provideda relevant contextual perspective in terms of

industry and geographic trends on the evolutionof FDI over time.

2 OCDE: Benchmark Definition of Foreign Direct Investment, 4th Edition, April 2008.

The context in which companies make decisionson FDI in Catalonia has two parts. On the onehand, it is made up of factors that can be consi-dered local. The role played at the local level hasdirect implications on decisive aspects such as theavailability of a wide range of infrastructure, theexcellent level of human capital in the region andthe existence of a certain business climate. Fur-thermore, at the global level there are also factorsthat can have a decisive effect on companies’ stra-tegic decision making regarding future FDI, suchas the more or less aggressive and innovative stra-tegies that other regions can implement to attractnew FDI.

As mentioned above, one point that was differentabout this year’s study compared to previous edi-tions was the innovative focus on the work me-thodology. Rather than have a representativesample of companies fill out a questionnaire, tech-niques were used to acquire a more accurate rea-ding of the more qualitative aspects of the currentsituation, challenges and opportunities faced bymajor foreign companies in Catalonia. The mainparts of this new methodology are as follows:

2.3Opportunities of FDI for Catalonia in a Context of World Economic Change

FDI constitutes a key part of the rapid economicintegration witnessed in recent years at the worldlevel. FDI represents a way to create stable, di-rect, long-lasting ties between economies. Atthe same time, FDI has become an importanttool for the development of the local businesscommunity and can help improve the competitiveposition of the receiving economy and theinvestor beyond its own borders.

In particular, FDI facilitates the transfer of tech-nology and know-how between economies. Italso provides opportunities for the economy of thecountry making the investment because its pro-ducts are promoted more extensively on interna-tional markets.

The significant growth in the volume of FDI in re-cent decades and the way in which FDI hasspread throughout the world reflect both an in-crease in the size and number of FDI transactionsand projects, and an increase in the diversificationof the companies in different economies and in-dustries. Large companies, corporations and mul-tinational holding companies traditionally played adominant role in these global transactions. Howe-ver, in recent years, there has been a consensusthat small and medium-sized companies have pla-yed a role of growing importance in FDI2 .

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In 2007, world outflows and inflows of FDI in-creased by more than 50% compared to 20063.Likewise, the number of FDI projects throughoutEurope increased by 5% compared to 2006, andby 95% compared to 20024. It should be bornein mind at the present time that the evolutionover time of global FDI figures is closely lin-ked to the evolution of the economic and fi-nancial situation. Therefore, once thenecessary adjustments have been made in theworld macroeconomic panorama, some kind ofrecovery by 2010 of the different indicators,as forecast by the main institutions5, shouldresult in increases in FDI flows and projectsthroughout the world.

This context of global economic adjustmentcoincides with another process, which is neithernew nor recent, and involves the acceleratedevolution of advanced economies in the NewEconomy. As an advanced economy, Catalonia isno exception, and its own production industriesare going through their own development.

Over the last three decades, the Catalan eco-nomy, with its strong industrial character, hasbecome an economy every time more basedprimarily on knowledge, and Catalan societynow depends more directly on the production,dissemination and widespread use ofknowledge and information. In this regard,

3 www.oecd.org4 European Investment Monitor 2008 Report.5 The International Monetary Fund has forecast global growth of 2.5% ofGDP by 2010 compared to a drop of 1.4% in 2009. http://www.imf.org/external/pubs/ft/weo/2009/update/02/pdf/0709.pdf

general movements are taking place in terms ofthe tertiarization of industrial activities andthe “industrialization” of service activities.

In this context, the strategies of attracting, main-taining and consolidating FDI have to be adap-ted to new consumer needs, productionmethods, and especially to contextual, energyand environmental factors.

Catalonia and the Barcelona area in particularface the double challenge of increasing theircompetitiveness in attracting FDI and maintai-ning and improving the level of satisfaction ofthe businesspeople operating in the region.

The aim of this document is to provide a workingtool to fulfil the objectives mentioned above andto present Catalonia as an attractive location forFDI in the global context. Barcelona City Coun-cil’s Area of International Economic Promotion,Invest in Catalonia (ACC1Ó) and Pricewaterhou-seCoopers would like to express their sincerethanks to all the people, companies and institu-tions that participated and cooperated in thedifferent phases of the project by so graciouslyproviding their opinions and input.

03CURRENT SITUATIONOF FDI IN CATALONIAAND THE REST OF THE WORLD

After experiencing a major increase in the firstyears of the 21st century, the aggregate figure ofFDI flows generated or received by different worldregions reached its high point in 2007. The latest

data published by UNCTAD show an aggregate fi-gure for FDI flows of $1.6 trillion, which representsa 10% reduction compared to the previous year.

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FOREIGN INVESTMENT IN THE BARCELONA AREA AND CATALONIA • CURRENT SITUATION OF FDI IN CATALONIA AND THE REST OF THE WORLD

The evolution of FDI over time is not markedly different from theprogress of economic activity; it is, in fact, a consequence ofeconomic activity. This section provides a brief and basicallyquantitative overview of the most recent data on individual andaggregate FDI flows received by different regions in the world. Thisanalysis is followed by a brief reflection on the trends describedrecently in the different strategies being used throughout the worldto attract FDI, regardless of whether or not they are linked tomacroeconomic development. Finally, the in-depth analysis of thesituation in Catalonia provides the main conclusions and outlinesthe different characteristics of the investment made in Catalonia byforeign companies.

3.1Current Situation of FDI in the World

The drop in FDI has been more pronounced in de-veloped countries and has been much smaller indeveloping and transition countries.

There is considerable consensus among the mainreference institutions that in financial year 2010the macroeconomic situation is expected to startimproving again, which will affect the recovery ofFDI flows around the world.

An analysis of inflows and outflows of investmentin different regions shows the dominance of Eu-rope, which accounts for nearly half of inflows andoutflows of FDI. Strictly with regard to inflows ofFDI, the region of Asia and Oceania receives about5%, which is nearly twice what it produces.

(1) Europe: Austria, Belgium, Bulgaria, Cyprus,Czech Republic, Denmark, Estonia, Finland,France, Germany, Greece, Hungary, Ireland,Italy, Latvia, Luxembourg, Lithuania, Malta, Ne-therlands, Poland, Portugal, Romania, Slovakia,Slovenia, Spain, Sweden, United Kingdom, Gi-braltar, Iceland, Norway and Switzerland.(2) Other developed countries: Australia, Israel,Japan, New Zealand. (3) Commonwealth of Independent States (CIS):Armenia, Azerbaijan, Belarus, Georgia, Ka-zakhstan, Kyrgyzstan, Moldova, Russia, Tajikis-tan, Turkmenistan, Ukraine and Uzbekistan.

GRAPH 01.WORLD FDI BY REGION (2008)

Source: UNCTAD FDI/TNC database

OUTFLOWSINFLOWSAfricaLatin AmericaAsia and OceaniaSoutheastern Europe and CIS (3)Other developed countries (2)North AmericaEurope (1)

100%

75%

50%

25%

0%

2.9%

6.9%

17.5%

4.7%

9.1%

13%

46%

2.6%0.3%

2.6%

9.8%

8.1%

16%

61%

GRAPH 02. DISTRIBUTION OF FDI ATTRACTION AT THE WORLD LEVEL (2003-2008)

Source: OCO Monitor database.China UnitedStates

India UnitedKingdom

France Russia Germany Spain Poland Romania

10,000

8,000

6,000

4,000

2,000

0

(by number of projects)

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Within the context of Spain and Europe, Cataloniaplays a leading role when it comes to attractingglobal FDI. This has been corroborated by severalstudies, such as the 2008 European InvestmentMonitor, which positioned Catalonia as thefourth most attractive location for setting up abusiness in a ranking topped by the region ofGreater London. In another a recent study byCushman & Wakefield,9 the Barcelona area wasranked fourth out of 34 leading European cities

as a place to do business, bearing in mind a widerange of contextual factors.

Catalonia has historically been a high-priority des-tination for foreign companies seeking new loca-tions to do business. FDI projects areimplemented in Catalonia in a wide range of tra-ditional and highly innovative industries, whichdemonstrates the region’s ability to welcome awide spectrum of foreign business initiatives.

By country, more than one fourth of the FDI pro-jects in the entire world originate in the UnitedStates, whereas Germany generates one tenth ofthe total. In the cumulative total for 2003-2008,Spain produced 2.5% of the world total.

China, the United States and India occupy the topthree positions in terms of the number of projects

received, a fact that explains the importance of newemerging countries on the world economic pano-rama. In this classification, Spain is ranked eighth.

However, in reference to the volume of FDI, Spainis in the seventh position worldwide, and the fourthin Europe, with a market share of 3.9%.

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Not all FDI is the same. Different kinds of com-panies have different reasons for investing be-yond the borders of the country where they havetheir main operations. Likewise, these samecompanies assess the decision to invest indifferent ways and have different priorities whenchoosing where to invest. In fact, these reasonsand priorities have changed a great deal in recentyears.

Many governments consider FDI in terms of thenumber of jobs created. However, FDI can havea considerable direct and indirect impact thatmay vary depending on the kind of FDI attracted,the region’s level of economic development, theties between FDI and the domestic economyand the degree to which the promotion of FDI isincluded in the economic strategy of the regionreceiving the investment.6

The fact that there has been a reduction in theamount of FDI around the world has automaticallyled to an increase in competition for a smallernumber of projects. In this context, it will be morecrucial than ever for governments (and their pro-motional organizations) to impact investment de-cisions by providing timely information on theregion and production industries, and to provideadditional services, such as accompanying com-panies as they explore their investment options.7

All this is relevant for attracting new investmentsand maintaining the FDI being received in the re-gion, because improving service and monitoringby the local government can ensure jobs aremaintained.

Finally, new, more efficient approaches towardstraditional promotional services, providing infor-mation and other services such as accompanyingpotential investors can ensure the success of FDIpromotional offices at a time when many publicadministrations are facing major budget cuts.

Other considerations that are the result of diffe-rent studies8 indicate that, regardless of trends inglobal economic activity, where FDI plays a keyrole, companies around the world are looking intonew markets and exploring the competitiveadvantages they have to offer. In other words,without bearing in mind the dollar value of theseflows, the number of countries in different partsof the world receiving FDI flows is increasing, asare the creation of wealth and new opportunitiesin parts of the world that, until recently, receivedlittle investment.

3.2Increased Competition to Attract FDI

3.3Current Situation of FDI in Cataloniaand the Barcelona Area

6 Foreign Investment Promotion Center – World Bank7 Global Investment Promotion Benchmarking 2009: Summary Report. World Bank Group8 IBM Plant Location International9 Cushman & Wakefield: European Cities Monitor 2009

23

03

25

Catalonia’s ability to attract FDI is supported bya labour force with a high level of professionalskills and a sophisticated level of consumer de-mand with considerable purchasing power. More-over, Catalonia has positioned itself as aprivileged platform for access to other marketsin Latin America, continental Europe and theMiddle East, not only for cultural and geographicreasons, but because of the strategic opportuni-ties offered by the Catalan and Spanish compa-nies in these regions.

More than 3,100 foreign companies were opera-ting in Catalonia in 2008. As shown in the tableand graph below, the countries with the most pre-sence in Catalonia in terms of the number of com-panies were France, Germany, the United Statesand Italy.

24


GRAPH 04. EVOLUTION OF GROSS FDI IN CATALONIA (2003-2008)

Source: Invest in Catalonia.

COUNTRY OF ORIGIN

Germany

France

United States

Italy

Netherlands

Japan

United Kingdom

Switzerland

Belgium - Luxembourg

Denmark

Sweden

Portugal

Austria

Canada

Finland

Norway

Other

Total

2006

705

519

399

356

198

148

140

111

87

67

62

46

44

28

20

15

55

3,000

2008

537

671

392

360

224

153

147

107

90

73

58

53

58

25

19

18

139

3,124

TABLE 01.

NUMBER OF FOREIGN COMPANIES OPERATING IN CATALONIA

In line with total world development and that ofthe main developed economies, the Catalan eco-nomy has behaved similarly in relation to the FDI

flows received in the last ten years. Total flows ofFDI received in Catalonia in 2008 amounted to€ 3,45 billion10.

GRAPH 03. EVOLUTION OF WORLD FDI AND FDI GROWTH IN CATALONIA IN THE LAST TEN YEARS

Source: UNCTAD FDI/TNC database and Ministry of Industry, Tourism and Trade.

0.0%

5.0%

0.0%

5.0%

0.0%

FDI in CataloniaWorld FDI

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

10 Ministry of Industry, Tourism and Trade.

Source:Ministry of Industry, Tourism and TradeNote: FDI includes ETVEs and NO ETVEs operations. ETVEs arethe FDI operations carried out in Spanish holding companies.

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

(In millions of euros)

2003 2004 2005 2006 2007 2008

90% of the foreign investment received in Ca-talonia comes from the EU-27, 4.4% from otherOECD countries and 5.6% from the rest of theworld. According to the investment criteria of ulti-mate origin, France, with 627 million Euros andan increase of 219.8% heads the list of investorswith more than a quarter (29.5%) of the volumereached in 2008. The Netherlands is in the secondposition (19.1%), followed by the USA (9.8%) and

the United Kingdom, Germany and Italy, each onecontributing about 6%.

The gross foreign investment in Cataloniathe first quarter of 2009 (data are provisional)reached 160.4 million Euros, which represents7.5% of 2008 total and 14.5% of Spain’s inwardinvestment during that period.

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26

In line with the growing importance of emer-ging industries, the advantages offered by theBarcelona area and Catalonia for FDI have evolved.There are currently activities and niche marketsin keeping with this advanced level of develop-

ment. These activities involve high added valueand a considerable technological level, with anemphasis on quality, differentiation, R&D&iand design.

Moreover, when the number of FDI projects star-ted up in Catalonia in the last 5 years is brokendown by sector, we can see that software andICTs accounted for more than 20% of these pro-jects and that, along with business services andconsumer products, they represented half of theFDI projects carried out.

Finally, based on the kind of FDI, and distinguis-hing between FDI generated by holding compa-nies and firms that are not holding companies,i.e. production FDI, the analysis shows thatthere was a considerable increase in 2008 in theproportion of investment through holding com-panies, which constituted more than one third ofall the FDI received.

GRAPH 07. INDUSTRIES ATTRACTING THE MOST FDI IN CATALONIA (2003-2008)

Source: OCO Monitor database.

60

40

20

0

(Numbers of projects)

BusinessServices

ConsumerProducts

Softwareand ICTs

Food & Tobacco

Pharma-ceuticals

Chemicals Textiles Transport FinancialServices

Automotive

GRAPH 08. INVESTMENT BY HOLDING COMPANIES AND NON-HOLDING COMPANIES IN CATALONIA

Source: Ministry of Industry, Tourism and Trade.

100

75

50

25

02006 2007 2008

Volume of investment

Holding Companies (millions of euros)Non-Holding Companies (millions of euros)

(%)

15%

85% 94%

6%

63%

37%

0,5 0,2 1,2

03A comparison between 2006 and 2008 reflectsthe stability of the total number of companies.Indeed, 40% of these companies have beenoperating in Catalonia for more than 10 years,which indicates the level of loyalty of theinvestments in the region and its sustainedcompetitiveness.

With regard to the Barcelona area, the analysis ofthe number of FDI projects attracted over theyears indicates that these projects represent atleast 75% of the total number of projects in Ca-talonia and, in 2008, these projects accountedfor 87% of all projects..

When the number of projects attracted is brokendown based on the field of activity, it can be seenthat 57% of the projects implemented from 2003

to 2008 focused on the activities of manufactu-ring, marketing, retail trade and logistics.

GRAPH 05. DISTRIBUTION OF FDI PROJECTS IN THE BARCELONA AREA AND CATALONIA (2003-2008)

Source: OCO Monitor database.

100

75

50

25

02003 2004 2005 2006 2007 2008

(*) Barcelonès, Maresme, Garraf,Baix Llobregat, Vallès Oriental, VallèsOccidental, Alt Penedès Counties

Rest of CataloniaBarcelona Area (*)


GRAPH 06. FDI IN CATALONIA BY FIELD OF ACTIVITY (2003-2008)

Source: OCO Monitor database (2003-2008).

120

80

40

0


Sales andMarketing

RetailTrade

Manufac-turing

Logistics Head-quarters

BusinessServices

R&D ContactCentres

Other Design Construction

04TRADITIONAL FDI INCATALONIA: CONCENTRATEDIN KEY POINTS ALONG THEVALUE CHAIN

31

The following subsections show the relationshipbetween the evolution of the different productionindustries in the Catalan economy and the chan-ges taking place in traditional FDI in terms of the

redefinition of company strategies and newneeds. Also addressed are the actions taken byother economic actors in the region to success-fully ensure and retain traditional investment.

FOREIGN INVESTMENT IN THE BARCELONA AREA AND CATALONIA • TRADITIONAL FDI IN CATALONIA04

30

Traditionally, foreign investment in Catalonia has come from com-panies in consolidated businesses and industries, and basically fromadvanced economies. Traditional FDI is also characterized by the factthat the companies that set up in the host country, in this case, theBarcelona area and Catalonia, generally fit the traditional model ofparent company-affiliate company, which means the decision-ma-king centre is far from the place where the FDI is invested. Anothercharacteristic of traditional FDI is related to the fact that the requiredknow-how is also consolidated and readily available in a wide rangeof places.

In the case of Catalonia, the main competitive factor for attractingFDI has historically been cost. Although this scenario was fully validfor most of the second half of the 20th century, increased competi-tion in the European Union and competition from regions wherecosts are lower has largely changed the current situation.

31

Therefore, in the case of traditional FDI in Catalo-nia, emphasis is now being placed on the pointson the value chain, such as R&D&i and logistics,that make it possible to maintain or increase the

competitiveness of the region as an attractiveplace to invest. For this reason, two workshopswere held with companies to focus on thesepoints.

FIGURE 3. KEY FACTORS AND ACTORS IN TRADITIONAL FDI

The Barcelona area and Catalonia in general haveevolved from an industrial economy into onebased on knowledge. This process, which begandecades ago, has sped up considerably in recentyears, thanks to major technical advances and

other basic trends, i.e. chiefly the progressivestructural change towards a service-basedeconomy, with an increase in tangible capitaland, in particular, the increased and growingimportance of processes linked to innovation.

4.1 The situation of the business community in mature industries: The focus on activities with high added value and knowledge-intensive activities

Source: Prepared by PwC

INITIAL FACTORS> Acceleration of the tertiarization process of industry > Commitment to competitiveness based on knowledge and added value

MATURE INDUSTRIES

MAIN OBJECTIVE:MAINTAINING

FOCUS OF ACTION:CONCENTRATION ONKEY POINTS ONVALUE CHAIN

PRIORITY AREAS FOR COMPANIESTHAT GENERATE TRADITIONAL FDI

> SKILLED HUMAN CAPITAL

> R&D&i INCENTIVES

> INFRASTRUCTURE

> SPEED AND EFFICIENCY WHENDEALING WITH PUBLICADMINISTRATION

> PARTNERSHIP FORMULAS

ADVANTAGES OFFERED BY THEBARCELONA AREA AND CATALONIA

> TRANSPORT INFRASTRUCTURE

> PROFESSIONAL TRAINING

> e-ADMINISTRATION

> INCENTIVES AND AID

> PUBLIC-PRIVATE PARTNERSHIPS

> TECHNOLOGICAL INFRASTRUCTURE

R&D&i

LOGISTICS

FIGURE 2. THE VALUE CHAIN AND TRADITIONAL FDI


R&D

PURCHASING AND SUPPLIES

LOGISTICS AND DISTRIBUTION

MARKETINGAND SALES

AFTERSALES

OPERATIONS

33

FOREIGN INVESTMENT IN THE BARCELONA AREA AND CATALONIA • TRADITIONAL FDI IN CATALONIA

33

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32

Although traditional industry continues to play akey role in the creation of wealth, the fact that ithas lost relative weight, especially in terms of job

creation, should be understood in the context ofthe generation of new synergies between ma-nufacturing and services functions.

The “integrated” sector – manufacturing andservices for production – represented 55.7% oftotal employment in Catalonia in 2005, whichwas 8.5% higher than the Spanish average.

The successful convergence between know-ledge-intensive activities in the industrial andservices sectors and new technologies has hadeffects on advanced Western economies such asthe Catalan economy. Following are the main be-nefits for the business community11:

GRAPH 12. FDI IN CATALONIA IN TRADITIONAL SECTORS (2003-2008)

This fact is important, bearing in mind theweight of industry in traditional FDI. 38% of all

FDI received in Catalonia is earmarked for theindustrial sector.

Agriculture and FishingConstructionConsumer ServicesProduction ServicesManufacturing Industries

ServicesAgricultureIndustry Construction

100

75%

50%

25%

0%

PERCENTAGE DISTRIBUTION

ANNUAL VARIATION RATES (%)

GRAPH 10. EVOLUTION OF EMPLOYMENT IN MAJOR ECONOMIC SECTORS: CATALONIA AND SPAIN

GRAPH 11. INDUSTRIAL INVESTMENT IN CATALONIA

Source: Secretariat of Industry and Enterprise.

Source: INE, Contabilidad Regional de España.

1995 2005 1995 2005CATALONIA SPAIN

2001 2002 2003 2004 2005 2006 2007 2008

6.5%

1.5%

-3.5%

The rate of industrial investment in Catalonia remained positive in 2008

One of the highlights of 2008 was the evolution of industrial investment, which continued to increase for thesixth consecutive year and finished at 2.2%. This demonstrates the industry’s drive to renew its equipment,production systems and technology as a key way to stay competitive.

2.2%2.9%

6.7%5.3%

3.5%

1.7%

-0.9%

• The internationalization of production proces-ses and the effects on how companies are or-ganized.

• Major changes in the nature and dynamics ofmarkets and company strategies.

• The growing interrelationship between manu-facturing and service activities in companies andalong the value chain, and also in terms of tech-nological and economic interdependence.

By restructuring logistics and distribution pro-cesses in companies in mature industries, thetrend in recent years has been to focus on in-creased technological development at keypoints along the value chain. Therefore, fordifferent mature industries in which logisticsconstitutes a relevant part of the financial re-sults, all the investment in distribution andinformation-systems infrastructure can result inconsiderable benefits for the affiliate companyand, ultimately, for the parent company.

11 “La nova indústria: el sector central de l’economia catalana”. Papers d’economia industrial no. 26. Catalan government. Ministryof Labour and Industry. Secretariat of Industry and Energy.

Source: Ministry of Industry, Tourism and Trade andPwC analysis (does not include holding companies).

41.8%

37.9%

12.0%

8.3%

ServicesConstructionIndustry and EnergyAgriculture

100

75%

50%

25%

0%

PERCENTAGE DISTRIBUTION

GRAPH 9. TRADITIONAL DISTRIBUTION OF GDP IN CATALONIA BY INDUSTRY

Source: IDESCAT2000 2005 2008

AS A PERCENTAGE OF TOTAL FDI

-2.0%

15%

10%

5%

0%

35


35

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34

As a result of the different interviews and dis-cussion groups with foreign companies in matureindustries, it was found that these companies

spend a considerable amount on R&D&i, moder-nizing their production structures and integratingwith suppliers and clients all along the value chain.

FIGURE 4. STRONG POINTS OF R&D&i IN CATALONIA

4.2The business model of companiesin mature industries: The R&D&i opportunity.

As a result, Catalonia is becoming even more at-tractive as a place for FDI for mature industriespositioning themselves to offer competitive ad-vantages at the points along the value chain thatare expected to show the best prospects forcompanies in coming years.

The number of innovative companies between2005 and 2007 was 10,470, a figure that repre-sents 27.4% of all companies12. In terms of thekind of innovation, the greatest trend is in processinnovation, followed by product innovation.

The Barcelona area has a solid base in the areaof research and innovation and the drive of publicand private investment in this area is setting the in-ternational benchmark.

Catalonia is the origin of nearly 1% of worldscientific production (on a par with that ofFinland and Scotland), 2.5% of that of EU-15and more than 25% of that of Spain13.

The fact that the foreign companies operating inthe Barcelona area focus on R&D is becomingone of the ways to maintain FDI flows. BecauseR&D is closely linked to production in traditionalindustries (electronics, automotive industry, phar-maceutics, etc.), Catalonia’s focus on maintai-ning and attracting production should alsobring R&D activity along with it.

AS A PERCENTAGE OF TOTAL FDI

GRAPH 13. FDI IN CATALONIA BY INDUSTRY (2003-2008)

Source: Ministry of Industry, Tourism and Trade and PwC analysis(does not include holding companies).


Chemical

Real Estate / Co

nstruction

Wholesale Trade and D

istribution

Finance

Agro-foo

d

Metallurgy

Business A

ctivities

Water and Energy

Retail Trade

Transport

Hospitality

Machinery

Cultural and S

ports Ac

tivities

Textiles

Plastics

Graphic Arts / Publishing

Autom

otive

Compute

r Activities

Paper

Electrical / Electronics

R&D&iLEGALPROTECTION

SKILLED HUMAN CAPITAL

AVAILABILITY OF INFRASTRUCTURE

CONSOLIDATED KNOW-HOW

Moreover, in terms of the human capital workingon R&D, though Catalonia has traditionally con-centrated more on development activities thanresearch, it holds a competitive position compa-red to other regions. Therefore, the number ofspecialized personnel, along with aspects suchas improved protection of intellectual property,makes the Barcelona area competitive when itcomes to possible offshoring in this specific con-text. As a result, Catalonia is more competitivethan regions such as Asia because of the pro-tection provided by the legal framework, goodprofessional practice and the rigour of thestandards and procedures to be followed,which is particularly true in sectors such as thepharmaceutical industry.

Finally, in the area of public-private cooperation,the strategy of encouraging companies to par-ticipate in the operations of research and tech-nology centres could involve providingincentives for communication and the participa-tion of the private sector in decision making onmajor investments in R&D&i. This could involveformulas for public-private partnerships and in-cluding leading companies in the industry, whichwould strengthen the commitment and involve-ment of the business community in the resultsof these partnerships.

12 Idescat.13 National Agreement on Research and Innovation.

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SUPPORT FOR THE TECNIO NETWORK IN CATALONIA

TECNIO15 is a network that connects the main technology-transfer centres and agents in Cataloniawith the aim of creating contact between companies and favouring the competitiveness and in-ternational projection of the Catalan business community. The advanced tehcnology centres of theTecnio network currently include: Ascamm, Leitat, CTM, Cetemmsa and CIBM.

They have been entrusted with the following two missions:

• Consolidating and promoting the technology-transfer model to generate a Catalan technologymarket that makes companies more competitive. The new network has more than 100 agents spe-cializing in the technology-transfer system in Catalonia. It is currently made up of technology cen-tres, advanced technology centres and university groups. New agents such as hospital researchfoundations and research centres are expected to join the network in the near future.

• Equipping companies with technology to provide added value to their projects and become aspringboard for their projection abroad.With the aim of increasing the competitiveness of compa-nies, TECNIO detects the needs of Catalan companies and informs them of the technological capa-city of the agents in the network. Companies can find a technology ally to implement R&D&i projects,solve their technology needs and receive support in the management of incentives and projects.


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36

Year after year, the governments of all advancedand emerging economies try to increase their in-flows of FDI by improving their business climate,developing different guarantees for investors andoffering several kinds of incentives.

According to the Organization for Economic Coo-peration and Development (OECD), the mostimportant factors considered by investors whendeciding on setting up in a specific location in-clude:

• A predictable, non-discriminatory regulatoryframework and a lack of unjustified administra-tive red tape for business.

• A stable macroeconomic context, including fa-cilities for international trade.

• Sufficient accessible resources, including thepresence of relevant infrastructure and humancapital14.

As a result of the discussion groups and inter-views carried out with the group of companiesthat generate traditional FDI, the aspects they aremost interested in were identified in relation tocompany needs and the competitive advan-tage of the Barcelona area and Catalonia inthese areas:

• The existence of policies, incentives andinvestment in infrastructure in relation to R&D&i

• High-capacity transport infrastructure forcarrying out logistics activities

• A fluid, expeditious relationship with institutionsfor administrative procedures

• The promotion of new forms of public-privatecooperation

• Skilled human capital at reasonable costs (seeSection 4.4)

R&D&i: the focus on networks and public aid

One of the main things being concentrated on inthe Barcelona area to make it more attractive forpotential FDI is related to technological infras-tructure. Companies have acknowledged theeffort made by the different public administra-tions to create technology centres and increaseincentives and programmes. As a result, 81% ofpolled companies in mature industries consi-der the level of technological infrastructure inCatalonia to be acceptable, and 13% said theywere very satisfied.

Catalonia has many technological researchparks operating in a competitive context in theregion. This action is producing good resultsand giving these centres a reputation for beingbenchmarks in their fields. One of the ways toexpand on this strategy is through cooperationbetween centres (in Catalonia, Spain and therest of the world) to offer increased specializa-tion and the availability of infrastructure tomake this cooperation more attractive to majorcompanies, as well as those with internationalcapital.

Therefore, technology parks can help attractnew FDI flows in the area of R&D because theyare equipped with virtual networks and latest-ge-neration technologies. They also have guidelineson the different lines of research to be carriedout, incentives for efficiency and productivity,and a long-term strategic approach, which makesthem one of the region’s outstanding assets.

Moreover, one of the basic conditions for R&D&iactivities to be carried out by foreign compa-nies in Catalonia is a network of excellentsmall companies in very specific fields (consul-ting, the manufacture of components and pro-totypes, design, etc.).

At the institutional level, the National Agree-ment on Research and Innovation (PNRI) hasentered into effect. It provides a roadmap on re-search and innovation for the next 15 years. Themain aims of this agreement are to position re-search and innovation as a leading priority on thepolitical, social and economic agenda, improvethe mechanisms for collaboration between uni-versities and companies, and establish the steps

to be taken to ensure research and innovationpolicies are efficient and effective.

Along similar lines, the Strategic Agreement toPromote the Internationalization, Job Qualityand Competitiveness of the Catalan Eco-nomy, 2008-2011 puts forth different measuresto increase economic productivity. The agree-ment is structured in 8 major areas: infrastruc-ture, employment and training policies, R&D&i,social policies, labour relations, financing econo-mic activity, creating an environment that fa-vours business activity and internationalization.

4.3The competitive advantage of Catalonia and the Barcelona area in terms of traditional FDI

14 Checklist for Foreign Direct Investment Incentive Policies. OCDE. 15 www.acc10.cat/tecnio.

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THE STRENGTH OF R&D&i INCENTIVES

The companies currently operating in the Barcelona area and Catalonia have access to a widerange of financial grants and incentives aimed at promoting innovation16. In general, this financialaid can be differentiated as follows:

• Financial aidAid to finance projects to improve technology, support programmes for innovation in SMEs andto create incentives for industrial research and experimental development projects, among others.

• Soft loan linesThese loans are granted with terms and conditions that are more advantageous than market condi-tions. The focus on soft loans as a way to support different business initiatives is becoming moreconsolidated. For example, loans are available for business projects at innovation centres and forR&D&i and industrial modernization. THE PORTS OF BARCELONA AND TARRAGONA AS KEY PORTS OF ENTRY

FOR GOODS IN WESTERN EUROPE

One of the strong points of Catalonia’s infrastructure is its ports, especially the facilities at thePort of Barcelona, which is considered the main logistics port in Southern Europe. It handles24% of foreign trade in Spain and 78% in Catalonia18.

In order to handle increases in traffic and become a benchmark port on the Mediterranean, newport areas are being created to double the port’s capacity and improve market accessibility. Theexpansion of the Port of Barcelona, with an investment of €3.59 billion, will give it an area of1,300 hectares.

The lease on the first terminal in the expansion was awarded to Terminal Catalonia, a companyin which the group Hutchison Port Holdings holds a stake. Hutchison Port Holdings is the leadingterminal operator in the world. The terminal will be positioned as a key platform for the flow ofgoods between Asia, Europe and the Americas. The Port Authority of Barcelona is working toattract the growing maritime traffic between Europe and Asia, especially traffic with China.

The Port of Tarragona, with a land area of 613 hectares19 and 36.3 million tonnes of goods trafficin 2007, is located one hour from Barcelona and is a key infrastructure for the area, which inclu-des a petrochemical cluster that is the largest of its category in Southern Europe. More than halfthe traffic handled by this port is chemical in nature.

Foreign companies confirm that both facilities are able to handle an enormous volume of goodsand also highlight the extensive list of daily routes to a great many countries.

After the expansion carried out at both facilities, one of the main challenges they face concernstransport intermodality, i.e. the integration of different modes of transport (air, rail, sea and road)to ensure the system is used profitably and effectively. Around 3% of the goods currently movedthrough the Port of Barcelona connect with the rail network and this figure is increasing by 25%per year and is expected to reach 30%.

GRAPH 14. INFRASTRUCTURE IN CATALONIA AND TRADITIONAL FDI

High priority

Medium priority

Low priority

Very satisfied Satisfied Acceptable Not very satisfied Dissatisfied

Catalonia's strong pointsPoints to be concentrated onto improve competitivenessOpinion of foreign companies

Availability and quality oftelecommunications

Accessibility of main roadsTechnological infrastructure Availability and quality of office space

17 www.aena.es 18 Port Authority of Barcelona.19 Port Authority of Tarragona.

16 www.acc10.cat

Infrastructure

For companies that generate traditional FDI, a highpriority is having access to good connections, es-pecially through airports and ports, so that goodscan be moved on short notice. Moreover, becauselogistics is important in these companies, advan-ces in terms of goods transport, arrival and distri-bution points, and an increase in the capacity ofdifferent communication routes are key to makinga region more attractive.

When companies that generate traditional FDIwere asked about infrastructure in the broadestsense (communication, technological, telecommu-nications and physical capital infrastructure), it wasfound that 75% consider this infrastructure in ge-neral to be acceptable or satisfactory.

It is worth noting that 87% of the companies aresatisfied or very satisfied with the availability andquality of telecommunications infrastructure, and56% have the same opinion about the availabilityof office space and business centres, especially inthe Barcelona area.

In terms of infrastructure that is important forattracting traditional FDI, airports occupy a pro-minent position. Thanks to the recent inaugura-tion of the T-1 terminal at Barcelona airport,connectivity with major cities all over the worldhas improved and Barcelona has positioned itselfon the same level as other European airporthubs.

In 2008, Barcelona airport handled more than 30million passengers and more than 320,000 ope-rations were carried out. In terms of cargo trans-port, more than 100 million tonnes of goodspassed through the airport facilities17. BesidesBarcelona airport, the airports in Girona and Reushave grown considerably, and handled 5.5 millionand 1.3 million passengers in 2008, respectively.

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More and more public-private partnerships are springing up in Catalonia. Of note are initiativessuch as the innovative management model of the Fira de Barcelona trade fair facilities (public ca-pital and private management) and the influx of public and private capital in a venture capital com-pany with headquarters in Barcelona that has become a shareholder of Spanair. Moreover, ingeneral, PPPs also promote strategic industries with the Barcelona brand.

The managers of companies in mature industriesare unanimous in their acknowledgement of thepriority represented by the level of knowledge andskills of professionals in Catalonia. In fact, 3 outof every 4 businesspeople are satisfied or verysatisfied with the technical and university trai-ning of the human capital. The result was thesame with regard to universities and businessschools. Moreover, foreign businesspeople feelthat, based on experiences of cooperation withuniversities on R&D, the quality of university re-search is at a very high level. Thus, with regard toR&D&i activities, professional skill is clearlyone of Catalonia’s strong points.

Some of the factors identified by companies inwhich greater effort should be made to maintainthe competitiveness of Catalonia included univer-sity-company connections, with 62%, and increa-sed ties between universities and similarinstitutions abroad, with 50%.

However, worth noting is that language levels,often identified as one of Catalonia’s major weakpoints, are considered by 62% of the managersof companies in mature industries to be ac-ceptable or satisfactory.

4.4Human capital

In terms of physical space where the foreigncompanies operating in the Barcelona area carryout their activities, the conclusion reached is thatthere is a suitable supply of space on industrial es-tates, with a well-equipped network, whichshould be accompanied in the future by the inte-gration of the metropolitan area of Barcelona inthe Barcelona brand as a way of attractinginvestment. This is possible through the creationof good connection infrastructure.

Furthermore, goods transport is one of the keyfactors for companies in mature industries to de-termine the level of productivity of theirprocesses. Although the road network has beenquite stable in recent years, the authorities havealso been taking measures to improve goodstransport by rail. Within this context is the re-cently expanded initiative involving the transportof components, parts and finished vehicles bet-ween the SEAT factories in the Zona Franca andMartorell and between Martorell and the Port ofBarcelona, in a clear drive towards sustainablegoods transport that favours the decongestion ofthe conventional road network. This is an exam-ple of how investment in improving or expandinginfrastructure can have an effect on retaining pro-duction capital and incoming flows of FDI in ma-ture industries. Moreover, the ambition tocontinue making progress in this area has led toconsiderable consensus in recent years betweenthe different economic and political agents invol-ved regarding the need to promote a majorMediterranean corridor for goods traffic,which would guarantee high levels of competiti-veness compared to the main logistics centresin continental Europe.

Modernization of the administration: support for eAdministration

With regard to the model for relations betweenthe public administration and companies for taxand labour procedures, the consensus is thatthere are ways to increase competitiveness inareas such as carrying out similar administrativeprocedures at different offices (of the same ordifferent public administrations) and the associa-ted waiting times. In the recent report, Doing

Business 2009, which compares different indica-tors on the ease of doing business in a sample of181 economies, Spain was ranked 49, a factwhich highlights the potential improvements in ef-ficiency from the perspective of management andadministration associated with the procedures allcompanies have to carry out20 .

The focus on the one-stop shop, the decisivesupport for eAdministration, interoperabilitybetween public administrations and overco-ming the difficulties of obtaining visas for pro-fessionals are some of the initiatives beingdeveloped for the immediate future that areexpected to be well received by foreign busi-nesspeople working in Catalonia. Within thiscontext, initiatives are being put into place in se-veral public administrations to considerably expe-dite the procedures to start up a business inCatalonia.

Moreover, the number of collaboration experien-ces has increased with the different autonomous-community public administrations (such as theNational Tax Administration Agency and the Cata-lan government) to expedite and minimize the im-pact of procedures on individuals and companies.As a facilitating element, an interoperabilityplatform has been started up, which, thanks tothe participation of specialized organizations (suchas the Consortium for Open Administration of Ca-talonia), facilitates electronic access to docu-ments and certificates held by the other publicadministrations.

Public-private partnerships

Public-private partnerships (PPPs) include differentforms of cooperation between public authoritiesand the different economic agents. The aim of thiscooperation is to finance, build, renew and use in-frastructure and services. PPPs have been imple-mented in transport, public health, education,safety, waste management and the distribution ofwater and energy21.

A broader concept of PPPs for the study at handinvolves considering all the actions that are usuallytaken under the auspices of public administrations,

including the more or less active partnership ofthe other economic agents, as well as the foreignbusinesspeople working in Catalonia.

The managers of foreign companies in matureindustries in the Barcelona area confirm theimportance of continuing to make progress in

terms of more flexible conditions for formalizinglocal collaboration agreements between multina-tionals and public organizations to obtain grants,which will clearly facilitate cooperation betweenthe private and public sectors.

Finally, in relation to PPPs within the frameworkof relations between parent and affiliate compa-nies, the existence of cooperation betweencompanies and public administrations and bet-ween the public administrations themselves is

viewed favourably by parent companies. A goodclimate for cooperation in this area makes itpossible to position the Barcelona area andCatalonia as a preferred destination for receivingnew FDI flows.

20 Doing Business 2009, World Bank Group (www.doingbusiness.org). Themethodology used to create this guide analyses all the Spanish public administrations, including national and autonomous-community administrations.

21 Green Paper on Public-Private Partnerships in the European Union[COM (2004) 327].

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As indicated in the table, company managers sho-wed a high or very high level of satisfaction withnearly all the variables that make up each factor.Only in the case of three variables under the fac-tors human capital and legal and tax frameworkdid they see opportunities for improvement. Thesevariables refer to the level of connection with fo-reign universities, the level of connection betweenuniversities and companies, and everything rela-ted to the procedural steps required to acquirework and residency permits in Catalonia by thepersonnel from the foreign company.

Variables such as quality of life, geographic andstrategic location, nearness to potential markets,clients and suppliers, and the level of concentra-

tion of companies in related industries are impor-tant for the managers of foreign companies in ma-ture industries in Catalonia.

More than 80% of foreign companies feel thatthe quality of life standards offered by the Bar-celona area and Catalonia are high or opti-mum. Likewise, 75% feel that the geographiclocation is one of the strong points of Cataloniathat place it in front of other locations that attracttraditional FDI.

Moreover, 44% of companies say they are satis-fied with the level of concentration of companiesin industries similar to their own, whereas another44% consider it to be acceptable.


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With regard to retaining talent, the attractive-ness of the Barcelona brand plays a decisiverole in attracting foreign executives and profe-ssionals, and companies feel it is necessary tofocus efforts on consolidating the availability oflocal human capital.

The availability of professionals from all over theworld with a good level of training and knowledgeof languages makes the Barcelona area an attrac-tive place to set up shared services centres andreflects the positioning of the region with regardto the new ways of organizing work.

Some of the points considered to be priorities interms of human capital by foreign managers in tra-ditional industries are:

• The general increase in the willingness to moveto a new place to work, especially among scien-tific personnel, given that these managers feelthat a certain amount of turnover in these posi-tions and the experience to be gained from wor-king for companies in other countries areadvantages.

• With regard to personnel working in R&D, opti-mizing the ties between research and profita-bility / productivity is also an area in which thepublic sector could increase the attractivenessof research centres for qualified internationalpersonnel, and improve the impression that fo-reign companies have of the professionals livingin Catalonia.

TABLE 2. THE OPINIONS OF DIFFERENT COMPANIES RESPONSIBLE FOR TRADITIONAL FDI IN CATALONIAABOUT CONTEXTUAL FACTORS: PRIORITIES AND LEVEL OF SATISFACTION

4.5Other contextual factors

GRAPH 15. HUMAN CAPITAL IN CATALONIA AND TRADITIONAL FDI

High priority

Medium priority

Low priority



Technical and universitytraining

University and business school programmes

Level of languages

University-companyconnections

Level of connection withforeign universities

CONTEXTUAL FACTOR VERY SATISFACTORY SATISFACTORY IMPROVABLE

MEDIUM PRIORITY

· Quality of life· Geographic location· Nearness to markets and clients

HIGH PRIORITY

· Concentrationof companies

· University and business school programmes

· Technical and universitytraining· Level of languages

· Level of connectionswith foreign universities· University-companyconnections

· Availability and qualityof telecommunications

· Accessibility of main roads· Availability and quality ofoffice space· Technological infrastructure

· Physical context · Legislative framework

· Work and residencypermits

· Cost of qualified labour· Production costs

· Cost of unqualifiedlabour

· Cultural and businessclimate· Level of integration

· Organization of work· Productivity / efficiency oflabour· Employee absenteeism· Instruction in Catalan

· Cultural, sports andleisure activities

· Public transport · Shop opening hours

· Direct public aid· Indirect public aid · Bank financing· Venture capital

Context &Market

Human Capital

Infrastructure

Legal & Tax Framework

Costs

Culture &Context

Services Available

Financing

The managers of foreign companies in matureand consolidated industries in general have avery favourable opinion of the different con-textual factors considered.

Table 2 provides a summary of the ranking of theeight contextual factors as a whole in terms ofpriority for the managers interviewed and theirlevel of satisfaction with certain variables includedin each factor.

The crucial points for foreign companies arethe context and the market where they carry outtheir activities, the level of skills of the human ca-pital they hire, the infrastructure, and regulatoryand tax framework that applies to them.

Source: Individual questionnaires taken by companies and analysed by PwC.

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With regard to the costs incurred by companieswhen setting up in Catalonia and performing theirregular activities, it is important to point out thatnearly 7 out of 10 foreign companies considergeneral production costs to be satisfactory orvery satisfactory.

With regard to labour, there is a certain amountof dichotomy between the perception of qualifiedand non-qualified personnel. Therefore, while80% of companies are satisfied or very satisfiedwith the cost of qualified manual labourers, thepercentage goes down to 43% for non-qualifiedlabour.

Regarding specific features of the organization ofwork in Catalonia, the factors valued the highestby foreign companies in mature industries are thebusiness climate and work culture (62% of com-panies are satisfied or very satisfied), and the levelof integration offered by the host population (58%

said they are satisfied or very satisfied). Producti-vity is considered acceptable by half of the com-panies. However, 50% of the businesspeople feelthe rate of employee absenteeism in their areasof activity could be improved.

GRAPH 16. CONTEXT AND MARKETS IN CATALONIA AND TRADITIONAL FDI

High priority

Medium priority

Low priority



Nearness of clients and markets

Concentration of companiesin related industries

Quality of life Geographic location

GRAPH 17. INVESTMENT COSTS IN CATALONIA AND TRADITIONAL FDI

High priority

Medium priority

Low priority



Cost of unqualified labourCost of qualified labour

Productioncosts

GRAPH 18.WORK CULTURE AND BUSINESS CLIMATE IN CATALONIA AND TRADITIONAL FDI

High priority

Medium priority

Low priority



Productivity / efficiencyof labour

Employee absenteeism

Instruction in Catalan

Organization of work

Business climate andwork culture

Level of integrationwith host population

GRAPH 19. SERVICES AVAILABLE IN CATALONIA AND TRADITIONAL FDI

High priority

Medium priority

Low priority


Catalonia's strong pointsPoints to be concentrated onto improve competitivenessOpinion of foreign companiesPublic transport

Cultural, sports andleisure activities Shop opening hours

With regard to the services available in the city ofBarcelona and Catalonia, though the companiesconsider the quality of the public transport net-work to be more of a priority, the variable with the

highest score is related to cultural, sports andleisure activities, which 81% consider satisfac-tory or very satisfactory.

The regulatory and tax framework and the easeof interacting with the public administrationare all considered major priorities by foreigncompanies.

62% of the companies are satisfied with the ge-neral regulatory framework in the Barcelona areain particular and Catalonia in general. Moreover,44% consider existing tax incentives to be accep-

table. However, half of the companies feel that thespeed of processing work and residency permitscould be improved.

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GRAPH 20. THE LEGAL AND TAX FRAMEWORK IN CATALONIA AND TRADITIONAL FDI

High priority

Medium priority

Low priority


Catalonia's strong pointsPoints to be concentrated onto improve competitivenessOpinion of foreign companiesWork and residency

permits Legislative framework

Tax framework

GRAPH 21. FINANCING TRADITIONAL FDI IN CATALONIA

High priority

Medium priority

Low priority



Direct public aidBank financing

Indirect public aid

Venture capital

Foreign companies also expressed their opinionabout the different kinds of public grants andthe specific features of access to private finan-cing. With regard to public grants, 68% of thecompanies consider them to be acceptable. Thesame percentage find access to private financing

through traditional methods, i.e. through the ban-king system, to be acceptable as well. Regardingventure capital, the companies in mature indus-tries consider it to be a moderate priority, giventhat it is a secondary method of access to finan-cing in these consolidated industries.

05FDI IN EMERGING INDUSTRIES IN CATALONIA: ATTRACTINGTALENT AND REACHINGCRITICAL MASS

05FDI in emerging industries is considerably different from traditionalFDI. It is investment that takes place in the new generation of pro-duction industries that are not yet extensively implemented through-out the world or are being implemented in industries whereinnovation plays a key role. This investment therefore does not takeplace in mature industries. Rather, it is most common within the fra-mework of the New Economy and the new consumer demands theNew Economy has created. The level of consolidation of the marketsof so-called emerging industries varies widely, given the differentimportance they have at the local and global levels, and the amountof know-how they require. Moreover, unlike traditional FDI, the con-ventional connection between the headquarters of the multinationaland the respective affiliate companies is often broken, and the deci-sion-making centre of these companies is often moved to the hostcountry.

The main points discussed in this section include local-globalalliances, the role of the development of clusters as a way ofattracting FDI in emerging industries, the factors considered keyby investment companies and how economic players respond tothese factors.

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FOREIGN INVESTMENT IN THE BARCELONA AREA AND CATALONIA • FDI IN EMERGING INDUSTRIES IN CATALONIA

FIGURE 5. KEY FACTORS AND ACTORS IN FDI IN EMERGING INDUSTRIES

5.1The dynamics of the business community in emerging industries: A note on local-global alliances

One of the features that defines entrepreneur-ship in emerging industries and this businesscommunity in general is the growth these indus-tries are expected to experience in coming years,given that they are associated with very high po-tential increases in productivity, as well as consi-derable technological improvements.

Another thing that makes these industries diffe-rent is the way they work in networks and in co-llaboration with others. In an environment basedon trust, companies are prepared to collaboratewith other market agents (institutions, competi-tors and suppliers) to develop the business andcreate partnerships with the aim of taking ad-vantage of potential synergies and contacts togrow.

In emerging industries, the reference model isbased on a combination of local and globalalliances. In general, as a preliminary step to es-tablishing international alliances, a company hasto have achieved a certain level of status in thelocal business community. The existence ofthis kind of alliance can attract international

investment, given the improved positioning ofthe local business community and the fact that itregularly cooperates at the global level.

Therefore, collaboration between local and inter-national companies is positive because, on theone hand, local businesspeople can considerablyfacilitate contact with possible investors and, onthe other, the international component can con-tribute know-how, given its experience launchingbusinesses all over the world.

Many connections emerge from personal con-tacts. It is important for the strategies of localand international entrepreneurs to find commonground for development. Moreover, going be-yond the vision of local business to infuse Cata-lonia with a global business perspective is one ofthe major challenges involved in positioning theregion as an important business centre with ex-cellent future potential. This will improve the po-sition of the Catalan production community andattract new investment flows.

Source: Prepared by PwC Source: Prepared by PwC

INITIAL FACTORS> Promotion of the organization of emerging industries in clusters> Local and global alliances as an alternative to the traditional competition model

EMERGING INDUSTRIES AND INTERNATIONAL ENTREPRENEURSHIP

MAIN OBJECTIVE: ATTRACTING ANDMAINTAINING

FOCUS OF ACTION:REACHING CRITICALMASS

PRIORITY AREAS FOR COMPANIESTHAT GENERATE FDI IN EMERGINGINDUSTRIES

> COLLABORATING INSTITUTIONS

> PROFESSIONAL SERVICES

> NETWORK OF RELATED COMPANIES

> INFRASTRUCTURE

> TALENT

> ATTRACTING CAPITAL

> QUALITY OF LIFE

ADVANTAGES OFFERED BY THE BARCELONA AREA AND CATALONIA

> INFRASTRUCTURE

> PRO-BUSINESS GOVERNMENT

> INCENTIVES AND CONSULTING SERVICES

> SHARED SERVICES CENTRES

> VENTURE-CAPITAL SUPPORT

> QUALITY OF LIFE

FIGURE 6. LOCAL AND GLOBAL ALLIANCES IN FDI IN EMERGING INDUSTRIES

> GLOBAL SUPPLIERS

> GLOBAL COMPETITORS

> GLOBAL PROFESSIONALS

> GLOBAL INVESTORS

> GLOBAL INSTITUTIONS

GLOBAL CONTEXT

> LOCAL SUPPLIERS

> LOCAL PROFESSIONALS

> LOCAL COMPETITORS

> LOCAL INSTITUTIONS

> LOCAL INVESTORS

LOCAL CONTEXTO

UTF

LOW

S IE

DIN

FLO

WS

IED

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The field study shows that one of the challen-ges facing the Barcelona area and Cataloniain terms of attracting and maintaining FDI inemerging industries involves ensuring the com-panies that set up have sufficient critical massto continue carrying out their activities in the re-gion. In this context, critical mass refers to the

network of related companies in certain indus-tries, having enough qualified human capitaland, most important of all, the availability ofenough venture capital to continue supportingthe business initiative. These last two points willbe developed below.

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5.2The role of clusters as generatorsof new economic activities

Innovation plays a key role in emerging industries,which are examples of the movement towards theNew Economy. These industries are also driversof development and sources of employment. Inthe Barcelona area and Catalonia, the focus onemerging industries is reflected in the existenceof business clusters. In fact, the distribution of se-veral industries in Catalonia is based on the clus-ter concept. In many sectors, there has long beena geographic concentration of companies in thesame business or value chain, many suppliers andcompanies providing interdependent services, aswell as associations, training centres, technologycentres and research specializations.

However, the government does not only concen-trate on existing clusters, but also promotesthose that will be important in the future, basedon their growth potential and strategic value forthe region.

Starting up a cluster is just the beginning. Inother words, identifying the competitivestrengths of a cluster calls for continuous dia-logue with companies and the other economicactors involved. Though the public sector can-not be the only driver of clusters, it can be pi-votal to facilitating their creation.

22 “Map of local industrial production systems in Catalonia”. Papersd'Economia Industrial no. 21. Catalan Government. Ministry of Labour andIndustry. Secretariat of Industry and Energy.

There are currently a number of initiatives inplace to promote entrepreneurship and the for-mation of clusters in Catalonia by making spaceavailable for companies to set up. This is the case

of the creation of science and technology parksas places for clusters to develop and the provisionof new tools that provide support to spaces andenvironments that encourage innovation.

FIGURE 7. HIGH VALUE INVESTMENT LOCATIONS MAP

Indeed, one of the ways Catalonia is positioningitself on the international economic scene isthrough the concentration of companies, organi-zations and related actors that are able to takeadvantage of proximity and mutual relations togenerate synergies and create scenarios forcompetitive advantage.

With regard to clusters, it is important to bear inmind that they represent an organizational unitof great value for understanding and improvingthe performance of advanced regional econo-mies. Moreover, viewing the economy in termsof clusters makes it possible to focus the eco-

nomic development policies of a particular re-gion on a group of companies rather than on in-dividual firms, thus ensuring common problemsand interests are dealt with. For example, a num-ber of companies in emerging industries havebeen set up in the neighbourhood of BarcelonaActiva. A network has also been created that hasa positive effect on the development of thesecompanies and that promotes interaction bet-ween different disciplines.

In the Barcelona area in particular, several clus-ters have been identified in strategic and emer-ging industries such as biotechnology. Indeed,

CLUSTERS IN CATALONIA: SOME FIGURES 22

• 42 clusters • 9,000 industrial establishments• 235,000 employees• €45 billion in turnover

In general, foreign businesses operating in Ca-talonia believe the organization of clusters is po-sitive for promoting a climate of trust andcooperation. Moreover, many believe that the pu-blic administration should focus its efforts onbeing a catalyst for businesses in the early sta-ges of development and the context in whichall their potential can be realized.

It should also be pointed out just how importantit is to generate and attract talent as way of cre-ating economic activity. This virtuous circle is cu-rrently coming to the fore in the Barcelona areaand Catalonia, thanks to the consolidation of cer-tain clusters under the auspices of the public ad-ministration.

22@ INNOVATION POLEIT-ENERGY-BIO-MEDIA-DESIGN - BARCELONA

LOGISTICS AND MOBILITY POLEVILADECANS-CASTELLDEFELS-ST. BOI-EL PRAT

CHEMICAL POLETARRAGONA

FUNCTIONAL NUTRITION POLEREUS

ADVANCED TECHNOLOGIESAND KNOWLEDGE POLECERDANYOLA-ST.CUGAT

MATERIALS AND CLEANTECHNOLOGIES POLEMANRESA

HEALTH AND OPTICS POLETERRASSA - SABADELL

IT APPLIED TOHEALTH POLE - MATARÓ

FOOD POLEGIRONA

AGROFOOD POLELLEIDA

Source: Invest in Catalonia - ACC1Ó

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this is one of the industries thought to have themost potential for growth in coming years.Though still in the development phase, the

Barcelona area and Catalonia have seen a consi-derable increase in the number of companies.

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BIOTECHNOLOGY AS A LEADING INDUSTRY OF THE FUTURE IN CATALONIA

• Barcelona is the main biotech hub23 in Spain. In fact, 24% of the biotech companies in Spainare located in Barcelona.• Catalonia leads the ranking of new patents in Spain. • The biotech industry in Catalonia is growing at a rate of 30% in terms of the creation of new com-panies. This rate is above the European average.

The public institutions have been supporting thebiotech community and technological infrastruc-ture in Catalonia and the creation of a top-rate pu-blic network to promote this cluster. There arecurrently nine science and technology parks inCatalonia with a total area of more than 500,000m2 where biotech and biomedicine activities arecarried out. Moreover, of the 900 recognized re-search groups in Catalonia, 400 work in the areaof the life sciences. The proportion is nearly thesame in terms of research centres: there are 60life science research centres out of a total of 150research centres in Catalonia. Finally, in Catalo-nia, there is a total of 215 hospitals, 6 of whichare leaders in Spain in terms of scientific pro-duction.

Another industry with strong growth potentialand presence in Catalonia is the energy sector.Catalonia has historically been known for havingcompanies in the energy sector and these com-panies are currently working on a great manyR&D lines and projects in fields such as renewa-ble energies and climate control systems. Thereare at present more than 1750 companies24 inCatalonia working in the field of renewable ener-gies. This industry, which is growing considerablybecause of the drive throughout the world in fa-vour of renewable energies, not only calls for afavourable business climate, but also requires re-gulations that provide suitable incentives forinvestment and production in the region, espe-cially when there is strong competition fromother economies that are very active in this field.

The Energy Plan (2006-2015) and the Plan forEnergy Improvement in Barcelona (PMEB) pro-vide the strategic framework for the energy sectorin Catalonia and the city of Barcelona for the nearfuture, with the intention of giving a strong pushto renewable energies and new energy infrastruc-ture. The share of renewable energies in theenergy balance is expected to go from 2.9% in2003 to 9.5% in 2015. The construction of theEnergy Park fits into this context. It will cover anarea of 25,000 m2 and will have educational cen-tres, R&D centres and companies in the energysector.

A strong push has also been given to the ICT sec-tor in recent years, especially when it comes tostrengthening the technological base and thesupply of specialized professionals. Catalonia isknown for being a leader in Spain in terms of theuse of new technologies and the Internet by com-panies and the general population. Proof of this isthe fact that 96% of Catalan companies have anInternet connection and this percentage is also ap-plicable to SMEs.

Of note in this context is the creation of the Bar-celona Digital Technology Centre as a bench-mark organization for ICTs in Catalonia thatspecializes in safety, health and mobility. Its ser-vices are mainly geared towards applied re-search and technological development, findingapplications for research, technology consulting,training and the promotion and dissemination ofthe use of ICTs. Also of note is the Microsoft

Pre-Incubation Program, an accompanying pro-gramme for the creation and growth of newcompanies in programming development, underthe auspices of Barcelona Activa, OsborneClarke and Microsoft.

BARCELONA, A PIONEER IN URBAN CLUSTERS: THE CASE OF 22@

Through the 22@ district, Barcelona has taken the initiative of creating an urban cluster that res-ponds to the city’s strategic vision of the future.

Attracting investments in key industries, attracting talent linked to new clusters, supporting entre-preneurship and reaching critical mass in industries with strong growth are some of the main cha-llenges facing Barcelona, which is competing with other major European cities.

While bearing in mind economic and social factors, the urban transformation has helped positionBarcelona as an innovative city and has provided a source of major economic growth.

Specialization in fields such as ICTs, media, medical technologies, energy and design, and invest-ments in new centres to support companies in these technologies, as well as businesses such asshared services centres are the seeds for the materialization of new clusters in areas with a po-tential for growth that will be important for the competitiveness of Catalonia and positioning Bar-celona as an innovative city.

23 www.biocat.cat24 Institute for Energy Diversification and Saving (IDAE).

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5.3The competitive advantage of Catalonia and the Barcelona area interms of FDI in emerging industries

56


The OECD has identified different strategies thatgovernmental organizations often put into prac-tice to attract FDI and the tools they use to doso. Two main strategies can be distinguished:those that bear in mind general incentives andthose that take a segmented approach to speci-fic objectives25.

In the case of the economy of Catalonia and theBarcelona area, a wide range of strategies isbeing implemented in relation to FDI in emergingindustries, including general measures to im-prove the context and business climate in Cata-lonia, and other incentives that apply to specificindustries in which it is understood that the localeconomy has a potential competitive advantage.

Catalonia’s strategic location makes it the ideal platform to enter continental European mar-kets, as well as markets in Latin America, North Africa and the Middle East.

Barcelona offers a world-renowned brand name and a privileged location that provides exce-llent accessibility to the entire Mediterranean. It is also a cosmopolitan city with a highly di-verse cultural mix.

25 OCDE. Checklist for Foreign Investment Incentive Policies.

Catalonia’s geographic and strategic locationis considered good or very good by 59% ofcompanies. Likewise, 41% have a satisfactory orvery satisfactory opinion of the nearness of po-

tential markets, clients and suppliers when itcomes to locating their businesses in the Barce-lona area and Catalonia.

GRAPH 22. CONTEXT AND MARKETS IN CATALONIA AND FDI IN EMERGING INDUSTRIES

One of the most attractive things about the Bar-celona area and Catalonia continues to be the highquality of life, which represents a very big advan-tage over competing locations when it comes toattracting business. Catalonia offers entrepreneursa highly competitive price-quality of life ratio du-ring the launch phase of their companies. One ofthe challenges currently faced is generating theoptimum conditions so these business initiati-ves enjoy competitive advantages during theentire life cycle of the project.

One of the main conclusions revealed by the wor-king groups with regard to the needs of compa-nies generating FDI in emerging industries isthat the priority requirements for starting up andconsolidating their business should include:

• Institutions that are receptive and eager to colla-borate during the entire business process: a pro-business administration• Expert advice on tax, legal and financial matters:professional services• A network of related companies and servicesuppliers• A physical space for setting up with suitable con-ditions: infrastructure• Talent in the form of skilled human capital (seeSection 5.4)• Support to attract initial capital through ven-ture capital firms with knowledge of the industry(see Section 5.5)• Other differentiating factors: the quality of lifein Barcelona and Catalonia

A pro-business administration as a catalyst of economic activity

Attracting new FDI to Catalonia involves imple-menting strategies that reflect Catalonia’s eager-ness to welcome business initiatives of all kindsand its openness to high-risk industries.

For international entrepreneurs in the process ofsetting up in the Barcelona area and Catalonia, it isessential to be able to count on specific, effectivesupport right from the earliest phases of setupand launch.

Of note are specific services such as theBusiness Location Service and the InvestmentIncentives Service, which the Catalan govern-ment makes available to local companies andcompanies with foreign capital through Invest inCatalonia.

Moreover, international entrepreneurs consider itvery useful to have a multilingual manual with themain steps to be followed, along with the exis-tence of advisors on administrative procedures,work and residency permits, etc.

The Catalan government’s policy is to support business activity and strategic change by pro-moting the quality of employment and the competitiveness of the economy, while also strength-ening areas such as research and development, innovation, technology transfer and theinternationalization of companies.

Moreover, Barcelona City Council’s Area of International Economic Promotion and Invest in Ca-talonia offer technical assistance adapted to the needs of companies with projects for invest-ment, reinvestment and expansion in all project phases, including optimization of the initialinvestment plan, starting up activity and follow-up. Barcelona Activa’s Do It in Barcelona pro-gramme is also designed to attract and retain international entrepreneurial projects.

High priority

Medium priority

Low priority



Nearness to clientsand marketsQuality of life

Geographiclocation

Concentration of companiesin related industries

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Finally, of special note are projects in whichtechnology plays a key role and which call forthe involvement of specialized agents withknowledge of the specific field who are familiarwith the most technical aspects of the project.

Professional services

Another basic part of starting up an activity and re-gular company operations is related to the qualityof the professional services available in the region.

One of the main priorities of companies in emer-ging industries and international entrepreneurs inparticular when setting up in Catalonia is the qua-lity and availability of professional services, es-pecially legal and business consulting services. It isalso important for them to have access to suffi-cient services for managing intellectual propertywith experts in the field and through consultationwith professionals.

A network of related companies and service providers

Another priority for foreign investors when settingup a business in an emerging industry is the exis-tence of the specific knowledge required to carryout the corresponding activity. In order to attractcompetence centres in the region, it is necessaryto be able to demonstrate to company headquar-ters that the region has the potential and the

know-how to contribute added value to the com-pany’s activity. It is therefore essential to be ableto demonstrate that there is a community of re-lated companies in the region. In this regard,55% of the companies in emerging industries be-lieve there is a satisfactory or acceptable level ofconcentration of related companies in the indus-tries in which they work.

Moreover, small companies quickly become orga-nized and adapt to the needs of the new compa-nies setting up around them. Synergies andcomplementary activities are set up between thelocal business community and companies thathave recently set up in the region

Infrastructure

On average, all business executives believe thatinfrastructure in the region is satisfactory. Regar-ding the availability and quality of office spaceand business centres, 51% of companies consi-der it to be satisfactory or very satisfactory. Mo-reover, companies consider access to the roadnetwork and mobility in general to be good.

Managers of companies in emerging industriesand new international entrepreneurs consider theairport connections in Barcelona to be of specialimportance and they highly rate the action takento increase the connections to an increasing num-ber of world destinations.

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Telecommunications and data infrastructure inCatalonia are at an advanced level with high ser-vice coverage and reliability. With an overall invest-ment in telecommunications infrastructure ofnearly 6% of Spanish GDP and supplier pricing po-licies that are moving progressively towards theEuropean average, the Barcelona area and Catalo-nia has one of the best services in this field, whichis of vital importance for foreign investment. Infact, telecommunications and data infra-structure is one of the factors rated the highestby businesspeople in emerging industries: 87%consider it to be good or very good.

Quality of life in Barcelona and Catalonia

In recent decades, the Barcelona area and Catalo-nia have been considered one of the regions withthe best quality of life in the world. Many differentspecialized publications have highlighted the city’sunique way of life, the quality of the gastronomy,the excellent cultural and artistic attractions, thecosmopolitan atmosphere, the cutting-edge designand the way the people of the city live their day-to-day lives.

Year after year, Barcelona consolidates its positionas the best European city in terms of quality of life.According to a study by Cushman & Wakefield26,Barcelona has maintained this position since 1996,in front of cities such as Paris, London and Dublin.

80% of companies in emerging industriesconsider the quality of life enjoyed in theBarcelona area and Catalonia to be satisfactoryor very satisfactory.

The quality of life in Barcelona, and by exten-sion, its area of influence, is one of the factorsthat foreign entrepreneurs in emerging indus-tries bear in mind the most when consideringthe region as a solid base to set up their activi-ties. They understand that Barcelona’s advanta-ges in terms of quality of life are key to attractingdynamic professionals who will start up interes-ting projects with high added value or will be-come staff members who work for thesebusiness initiatives.

In terms of attracting FDI in emerging industries,for international entrepreneurs the quality of lifein Barcelona and Catalonia has become a strongpoint for attracting talent to the area.

Finally, 65% of managers of companies in emer-ging industries and entrepreneurs consider thecultural, sports and leisure activities in Catalo-nia and the Barcelona area in particular to begood or very good.

26 European Cities Monitor, Cushman & Wakefield.

GRAPH 23. INFRASTRUCTURE IN CATALONIA AND FDI IN EMERGING INDUSTRIES

High priority

Medium priority

Low priority



Availability and quality oftelecommunications

Availability andquality of office space Accessibility of

main roads

Technological infrastructure

05

61

5.4Human capital

60


Businesspeople are aware of the strong effortmade in Catalonia and the Barcelona area toattract R&D and excellence centres and believethat Barcelona should also promote itself asa hub for entry into continental Europe withthe aim of encouraging companies to set uptheir corresponding divisions of emerging in-dustries.

In this context, the talent linked to clusters andemerging economic activities is a valuable re-source that is much sought after in advancedeconomies.

There has been a progressive concentration inthe Barcelona area of expert candidates in veryspecialized industries, which is a key factor forcontributing to the steady growth and consolida-tion of companies in emerging industries.

The high concentration of educational institutionsin Catalonia allows the region to offer a wide andsolid range of studies that respond to the stan-dards of the most advanced economies. Catalo-nia is therefore a leading destination in terms ofthe number of universities, training programmesand students. Moreover, Barcelona has becomeone of the main destinations in Europe for a widerange of studies. In the 2007-2008 academic

year, a total of 6,561 students were enrolled inCatalan universities, and 4,368 Catalan studentsdid part of their studies outside Catalonia27.

Furthermore, the recognition of business schoolssuch as ESADE and IESE by different internatio-nal publications and rankings has made Barce-lona a strong candidate to receive foreignexecutives interested in improving their know-ledge of management.

There is currently consensus about the availabi-lity of qualified labour: entrepreneurs considerthe level of engineers and other technical profilesin general to be very high. 59% of companies inemerging industries and international entrepre-neurs consider the technical and universitytraining of the human capital available in Ca-talonia to be good or very good. The training atuniversities and business schools is also rankedhigh.

With regard to the connections between local andforeign universities, and between universities andthe business community, the majority of compa-nies in emerging industries and international en-trepreneurs consider them to be acceptable.

27 Idescat.

In this regard, companies consider seeking outsynergies between the business and acade-mic communities to be important so compa-nies can have access to the best trained andmost specialized professionals. With this aimin mind, it is important for students to continueacquiring the skills needed by the business com-munity as a way of guaranteeing the supply ofhuman capital for companies generating FDI inemerging industries. In this context, internatio-nal entrepreneurs advocate increased connec-tions between the academic community and theneeds of companies, and believe that creatingspecific entrepreneurial programmes at busi-ness schools could be of interest to attractgreater flows of foreign investment and entre-preneurial talent, and increase the local popula-tion’s interest in entrepreneurship.

The area in which companies feel there is thegreatest potential for improvement is in theknowledge of foreign languages, especially En-glish: 75% of managers expressed this opinion.It is important to highlight the fact that compa-nies in emerging industries consider theknowledge of languages to be much more ofa priority than managers in consolidated in-dustries. This explains why the presence of En-glish in the New Economy and in the context ofglobal alliances is so important.

Finally, the managers of companies in emergingindustries and entrepreneurs consider the go-vernment’s support of policies aimed at impro-ving the most common procedures forforeigners working at companies set up in Cata-lonia to be very important.

GRAPH 24. HUMAN CAPITAL IN CATALONIA AND FDI IN EMERGING INDUSTRIES

High priority

Medium priority

Low priority



University and businessschool programmes

Level of connection with foreign universities

Technical and university training

University-companyconnections

Level of languages

5.5Access to financing: venture capital and public aid

With regard to the different investment modelsassociated with FDI in emerging industries, themost common is a partnership between a localinvestor and one or more foreign investors who,in turn, are able to attract new foreign investment.

One of the basic needs in emerging industriesand international entrepreneurship is havingaccess to different alternatives when it comesto venture capital, and this is true in early stagesand when these companies try to reach a cer-tain level of consolidation. To make this possible,at least two things are necessary:

• The existence of industry-specific venturecapital

• A commitment from the government, local de-velopment agencies and other actors in theworld of finance

For foreign investors, it is very important to haveaccess to specialized local venture capital.When launching a company in the emerging in-dustries, it is known to be difficult to find initial fi-nancing, given the perception that it is a high-riskinvestment. It is especially important for start-ups to attract financing quickly.

Business angels are known for dedicating capitalfrom traditional industries to more mature andconsolidated activities. This is because investorswith a much more conventional business and in-dustrial background lack knowledge about the in-novative and highly technological activities ofcompanies in emerging industries.

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6362


FIGURE 8. THE VIRTUOUS CIRCLE OF VENTURE CAPITAL IN RELATION TO EMERGING INDUSTRIES AND FDI

Based on this premise, 50% of the foreign busi-nesspeople represented in the discussiongroups said that one of the areas in which Cata-lonia can increase its competitiveness is inaccess to financing in the form of venture capi-tal, as well as access to financing through

standard institutions (banks and savings banks),though this latter option is considered less of apriority for international entrepreneurs.

Regarding the public administration’s role, busi-nesspeople in emerging industries feel thatincreased efforts should be made to make requi-rements more flexible and speed up proceduresfor granting different lines of financing. They alsofeel that support strategies should be developedthat target the needs of companies and that arehighly coordinated between the different publicadministrations.

Bearing in mind the volume of incentives andgrants available and the initiatives currentlybeing developed so aid reaches business pro-jects, it is important to take action to commu-nicate and disseminate information on thedifferent financing options available, and the-reby ensure companies take advantage of all thefinancing toob available.

GRAPH 25. FINANCE FOR FDI IN EMERGING INDUSTRIES IN CATALONIA

High priority

Medium priority

Low priority


Catalonia's strong pointsPoints to be concentrated onto improve competitivenessOpinion of foreign companiesIndirect

public aid

Direct publicaid

Bank financing

Venture capital


SUCCESSFULCASES

COMPANIES INEMERGING INDUSTRIES

GUARANTEES

CRITICALMASS

CREATE

GIVE INCENTIVES TO

GENERATES

NEED

NEW ENTREPRENEURS AND VENTURE

CAPITAL

SPECIALIZEDVENTURE CAPITAL

However, it is worth pointing out that in Barce-lona, the activity of the venture capital commu-nity and family offices is currently on the rise.The experts in this field believe that when Bar-celona has successful companies built onventure capital that become widely knownthroughout the world, financing for these kindsof projects could surge.

One of the main conclusions of the workshoporganized within the framework of the studywas that the way to create favourable dynamicsfor expansion in emerging industries in Catalo-nia and, by extension, in companies with foreign

capital, is to have a suitable financial environ-ment for these investments to favour the crea-tion of a sufficient number of companies inemerging industries that, in turn, promote theemergence of specialized venture capital in theindustry. This, along with the successful casesmentioned above, could create a virtuous circleand the desired positive dynamics.

BANK GUARANTEES, VENTURE CAPITAL, MICROCREDITS AND CO-INVESTMENT PROJECTS THROUGH IFEM

There are currently a number of different initiatives and programmes in Catalonia28 to facilitateaccess to financing for companies, including a newly created company connected to the CatalanFinance Institute (ICF)29, which provides small and medium-sized Catalan companies (SMEs) withdifferent tools to finance innovative projects involving considerable risk. Financial Tools for Inno-vative Companies (IFEM) is a company created by the Catalan government with a €50-millionbudget to implement different lines of action until 2013.

IFEM will carry out its activity in four areas: promoting venture capital funds, granting bank gua-rantees, granting microcredits and co-investing with networks of private investors. The companyis designed primarily to focus on SMEs because this business group often has a difficult timeacquiring outside financing, especially for innovative projects involving considerable risk.

This initiative has received the support of the European Union. Part of the resources the Catalangovernment will channel into the ICF will be European Regional Development Funds (ERDF)linked to the Joint European Resources for Micro to Medium Enterprises Programme (JEREMIE).

28 www.cidem.com/cidem/cat/suport/financament/index.jsp29 www.icfinances.com

5.6Other contextual factors

This section provides a brief summary of thelocal contextual factors that affect investmentby foreign businesspeople in emerging indus-tries and international entrepreneurship. In ge-neral, the managers of foreign companies havea highly satisfactory opinion of the different con-textual factors considered.

Table 3 provides a summary of the level of prio-rity given by the executives and managers in-terviewed to the 8 contextual factors as a whole,

and their level of satisfaction with the differentvariables included under each factor.

Foreign companies in emerging industriesconsider the following points to be the mostrelevant for the development of their businessin Catalonia: access to financing, the legal andtax framework and infrastructure.

CONTEXTUAL FACTOR VERY SATISFACTORY SATISFACTORY IMPROVABLE

·

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6564


Of note is that 41% of the companies in emer-ging industries consider the costs associatedwith qualified labour to be very satisfactory, andthat 28% consider them to be good. These per-

centages go down to 4% and 17%, respectively, inreference to the costs of unqualified labour. Finally,general production costs are considered satisfac-tory or very satisfactory by 60% of companies.

TABLE 3. THE DIFFERENT COMPANIES RESPONSIBLE FOR FDI IN EMERGING INDUSTRIES IN CATALONIA INTERMS OF DIFFERENT CONTEXTUAL FACTORS: PRIORITIES AND LEVEL OF SATISFACTION

· Direct public aid· Indirect public aid

· Bank financing· Venture capital

· Legislative framework· Work and residencypermits

· Tax framework

· Availability and quality of office space

· Accessibility to mainroads· Availability and quality oftelecommunications· Technological infrastructure

· Nearness to clients andmarkets· Concentration of companies

· Quality of life· Geographic location

· Level of languages· Technical and university training

· University-companyconnections· University and businessschool programmes · Level of connectionswith foreign universities

· Employee absenteeism· Level of integration

· Cultural and business climate· Organization of work· Productivity/efficiency oflabour· Instruction in Catalan

· Cost of qualified labour· Production costs

· Cost of unqualified labour

· Shop opening hours · Cultural, sports andleisure activities· Public transport

Finance

Legal & Tax Framework

Infrastructure

Context & Market

Human Capital

Culture &Context

Costs

Services Available

MEDIUMPRIORITY

HIGH PRIORITY

Source: Individual questionnaires taken by companies and analysed by PwC.

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67

The specifics on how work is organized in Catalo-nia in terms of schedules, work culture and busi-ness climate, productivity and employeeabsenteeism are of key interest to managers ofcompanies in emerging industries. Of note is the

fact that 59% of businesspeople are satisfied orvery satisfied with the level of employee absen-teeism at their companies and 55% consider theproductivity and efficiency of labour to be good orvery good.

66


Above and beyond what the Barcelona area andCatalonia offer in terms of leisure and culture ac-tivities, 52% of the companies appreciate theservice and quality of the public transportsystem and consider it to be good or very good.Moreover, in relation to the flexibility of shop ope-

ning hours, 40% consider it to be acceptable,25% feel it is good or very good, and 35% be-lieve it can be improved.

Finally, 40% of companies consider the tax fra-mework in Catalonia to be acceptable or good,and 1 out of 3 companies have the same opinion

about the regulatory framework in which theycarry out their activities.

GRAPH 26. THE COST OF INVESTMENT IN CATALONIA AND FDI IN EMERGING INDUSTRIES

High priority

Medium priority

Low priority



Productioncosts

Cost of unqualifiedlabour

Cost of qualified labour

High priority

Medium priority

Low priority



Productivity / efficiency of labour

Level of integration withhost populationEmployee absenteeism

Business climate and work cultureOrganization of work

Instruction in Catalan

GRAPH 27. WORK CULTURE AND BUSINESS CLIMATE IN CATALONIA AND FDI IN EMERGING INDUSTRIES

High priority

Medium priority

Low priority


Catalonia's strong pointsPoints to be concentrated onto improve competitivenessOpinion of foreign companiesPublic transport

Shop opening hours

Cultural, sports andleisure activities

GRAPH 28. SERVICES AVAILABLE IN CATALONIA AND FDI IN EMERGING INDUSTRIES

High priority

Medium priority

Low priority



Tax frameworkWork and residency permits

GRAPH 29. THE LEGAL AND TAX FRAMEWORK IN CATALONIA AND FDI IN EMERGINGINDUSTRIES

Legislative framework

06GEOGRAPHIC ANALYSIS OF FDI IN CATALONIA

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71

The methodology used for the study and the fieldwork made itpossible to break down the trends and specific features in diffe-rent geographic regions into segments in terms of the investmentsmade, the objective needs of these companies and the perspecti-ves for the future.

Specific geographic workshops were held for the United Statesand Canada, and for the Asian companies established in Catalo-nia. The companies from European countries were present in allof the other industry workshops, which provided sufficient infor-mation from companies to consider them an independent seg-ment in this section. Finally, several interviews were held inrelation to Mediterranean countries that confirmed that they aresufficiently different to be treated as a separate group in the analy-sis by geographic region.

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FOREIGN INVESTMENT IN THE BARCELONA AREA AND CATALONIA • GEOGRAPHIC ANALYSIS OF FDI IN CATALONIA

Besides the different workshops and interviewsheld with the companies representing each re-gion, the interviews with different facilitators

provided relevant complementary conclusionsfor this section.

6.1Europe and the United States

Western European countries together with NorthAmerica (the United States and Canada) havebeen the geographic areas producing the main FDIflows in traditional industries received by theBarcelona area and Catalonia in recent decades.

The companies from these regions often belongto mature, consolidated industries, such as che-micals, the automotive industry, pharmaceuticals,machinery manufacture and banking, amongothers.

GRAPH 30. VOLUME OF FDI IN CATALONIA BY REGION OF ORIGIN

Source: Ministry of Industry, Tourism and Trade (2003-2008) datadoes not include holding companies.

(*) The Mediterranean countries include: Algeria,Tunisia, Morocco, Libya, Egypt, Lebanon, Israel, Jordan, Syria, Palestine and Turkey.

100

75

50

25

0Europe North

America Asia

( %)

78.9%

15.4% 1.6%

Mediterranean (*)

1.3%

Other

2.7%

13%12%

7%5%

5%

20% 21%

17%

GRAPH 31.MAIN INVESTOR COUNTRIES IN CATALONIA BY NUMBER OF COMPANIES (2008)

Source: Invest in Catalonia

France, Germany and the United States accountfor the origin country of more than half of the fo-reign companies established in Catalonia. Moreo-ver, Catalonia is the operations base of 60% of theAmerican companies operating in Spain, 62% ofthe French companies, 61% of the German com-panies, 47% of the British companies, and 54%of the Italian and Belgian companies.

The decision of European and Americancompanies to set up in the Barcelona areaand Catalonia: factors that make a difference

Western European and American companies havea very positive opinion of the improvements inpassenger air transport, given the increase in di-rect trans-Atlantic flights and regular flights from

the main investor countries. Along with new in-frastructure, these improvements have had consi-derable impact.

In the case of companies where logistics plays akey role (and for companies in mature industries,this is generally the case), the following conditionsin the region are considered crucial, among others:the location, warehousing costs, the capacity andnearness of the port and good infrastructure.

Likewise, the French Chamber of Commerceconsiders Catalonia to have great potential as alogistics centre because it guarantees access tothe markets in Spain, North Africa and SouthernEurope, and because it has two high-capacityports, a developed road network and good logis-tics operators.

FranceGermanyUnited StatesItalyNetherlandsJapanUnited KingdomOther

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FOREIGN INVESTMENT IN THE BARCELONA AREA AND CATALONIA • GEOGRAPHIC ANALYSIS OF FDI IN CATALONIA06

72

In the case of large multinationals, quality of life isconsidered to be important to attract human capi-tal and to help executives decide about movingabroad, but not when making decisions about thelocation of affiliate companies, which is more clo-sely linked to the company’s internationalizationstrategy.

Though most foreign companies established inthe Barcelona area and Catalonia form part of ma-ture industries, American companies also focus on

investments in the fields of nanotechnology,biotechnology, ICTs and, more recently, rene-wable energies. In the case of German compa-nies, there has been a considerable increase in thenumber of retail companies, whereas the numberof industrial companies has reached a plateau. Ofthe approximately one thousand German compa-nies in Catalonia, most form part of the servicesindustry and distribution sector. Because of theproximity of France, almost all the French compa-nies operate in production industries.

Challenges for the future to maintain andattract FDI from Europe and the UnitedStates and associated strategies

Given the current world macroeconomic situation,European companies and actors such as the Ame-rican Chamber of Commerce are convinced that,now, more than ever, governments have to makea priority of maintaining the FDI from these com-panies. Another conclusion garnered from the dis-cussion groups is that, although there are veryinteresting initiatives in relation to innovative in-dustries that are strategic for the Catalan eco-nomy, support should continue to be given tocommunicating and marketing these initiatives toensure information reaches all potential targets. With respect to the incentives used to retain andincrease the amount of FDI attracted by Catalonia,European and American businesspeople supportthe following:

• Defining highly competitive programmes forpublic aid that make it possible to select the pro-jects with the most added value for Catalonia,while ensuring the maximum level of communica-tion between foreign companies and the public ad-ministration at all times.

• A continued drive to inform Catalan society aboutthe positive aspects of the values of entrepre-neurship, international exchange at all levels andthe importance of speaking languages in a globali-zed, interconnected world.

• To continue increasing the amount of industrial landin the Barcelona area and the relevant public servicesrequired.

• Exploring ways to improve access to housing forforeign employees.

6.2Asia

In recent years, the emergence of certain mar-kets as new investing countries at the world levelhas been significant. Southeast Asian countries,China and petroleum-exporting countries havetaken advantage of the surplus in their econo-mies to change from net receivers of capital tonet issuers.

Several Chinese and Indian companies have com-pleted major purchase operations. They are mul-tinationals interested in expanding into Europethrough acquisitions, because it is the fastestway to gain access to distribution networks. Mer-gers are another solution, given the economiesof scale they generate (TATA Motors is an exam-ple). On the other hand, companies from Japanand South Korea, which have been importingsteadily to Catalonia for a longer period of time,prefer to set up in Europe with their own brands.

For example, Catalonia is the base of operationsof 70% of the Japanese firms operating in Spain,which shows that, besides attracting new FDIfrom untraditional regions of Asia, there is a veryconsolidated, historical presence of foreign in-vestment from Japan in Catalonia.

The decision of Asian companies to setup in the Barcelona area and Catalonia:factors that make a difference

In the case of Catalonia, most Asian companiesthat come to set up affiliates are medium-sizedfirms, with the exception of companies fromJapan. Though most Japanese companies rein-vest in mature, consolidated industries, other Ja-panese companies have recently beenestablished in Catalonia that work in renewableenergies through the divisions of establishedcompanies.

Among the factors that help companies decideis the projection of potential markets offered bythe Barcelona area. Catalonia’s geographic lo-cation is considered one of the main attrac-

tions for setting up company headquarters.Once they are set up in Catalonia, they can ex-pand their business to Spain and Portugal, Wes-tern Europe and, as is happening more and moreoften, North Africa and South America.

The existence of clusters and industries withcompanies and production centres, as well as aconsolidated auxiliary industry, as in the case ofthe automotive and textile industries, was a veryimportant factor when locations for FDI were re-latively restricted. However, this factor has re-cently become less important, though it is stillrelatively significant.

With regard to the costs of setting up, Cataloniatraditionally had low operating costs, so its com-petitiveness was good. This factor has graduallybecome less important and other factors havegained status, such as the existence of a com-petitive business community and the pre-sence of production companies, which make itpossible to guarantee that the foreign compa-nies setting up in Catalonia will have accessto a complete network for the support andsupplies they need.

The managers of Japanese companies see Barce-lona as a strategic geographic location with a veryhigh standard in terms of quality of life, and as adynamic, attractive city that is quite safe. Thoughthese factors do not initially represent a significantdifference compared to the perception of compa-nies from other regions, they take on special signi-ficance when it comes to the business climate andthe way people do business in the Barcelona area,because Japanese firms feel it is very similar totheir own way of doing business. Moreover, theease of identifying with other cultures and the com-prehension of hierarchies and discipline at work arefactors the managers of Japanese firms highlightthat make Catalan culture stand out from other re-gions. Other strong points include the fact that therate of employee absenteeism in the Barcelonaarea is relatively low, punctuality is respected andcustomer service is quite good.

HUMAN CAPITAL AND EUROPEAN AND AMERICAN COMPANIES

The managers of European and American companies believe that Barcelona has a very good supplyof business schools and that the connections between academia and the business community areacceptable. Companies generally find good support at these business schools and often collaboratewith them.

There is a good level of satisfaction among American businesspeople regarding the university andbusiness-school programmes available, given that 50% of them consider these programmes to besatisfactory or very satisfactory. However, 60% feel there is room for improvement in terms of theconnections between academia and the business community.

More than 50% of European companies find the technical and university training of the human ca-pital to be satisfactory or very satisfactory.

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For these reasons, despite having costs in certaincases that are higher than some East European re-gions, Catalonia has attracted the interest of Asiancompanies eager to set up in Southern Europe.

In terms of the kinds of Asian companies opera-ting in the Barcelona area, one of the most im-portant factors about the business model is thatthere is a strong emphasis on the business groupand that affiliate companies often share the samepolicies. Moreover, Asian multinationals’ conceptof globalization is different from the Western con-cept. Asian firms tend to only internationalize pro-duction (as in the case of Sony, Toyota and

Nissan), while they maintain the philosophy andworking method of their own countries.

Another factor of interest in relation to how someAsian companies operate involves the model forthe distribution of work, in that the amount of in-volvement of the different managerial levels isgenerally very high in all areas of activity, evenwith regard to production processes in industriessuch as manufacturing, which is not the case inmost Western companies.

HUMAN CAPITAL AND ASIAN COMPANIES

The availability of qualified labour, especially engineers, is seen as very positive, as is the pre-sence of leading business schools.

There is also unanimity that the level of technical and university training of employees in Catalo-nia is satisfactory or very satisfactory, along with the availability of university and business-schoolprogrammes. The managers of Asian companies who responded said they consider the level of ex-cellence in these two areas to be high or very high.

It is important to bear in mind that, for Asian cultures, work is not merely a source of income, buta social activity where education and values are promoted and given special importance. UnlikeWestern societies, in Asian cultures there is not such a sharp division between personal and pro-fessional life.

The consensus among Japanese managers is that once companies have set up in Catalonia, theycan offer their employees secure, stable jobs. However, these managers are surprised by the con-siderable turnover among technical personnel, especially engineers, who often leave to seekhigher salaries from other companies.

Challenges for the future to maintain and attract FDI from Asia and associatedstrategies

One of the main challenges faced by the Catalangovernment when it comes to attracting new FDIfrom Asia is being able to compete with the re-gions Asian investments tend to gravitate to-wards. Catalonia’s chief competitors as prioritydestinations for companies from Asian countriesare Germany and the United Kingdom. Moreover,the leading destinations for companies that base

their competitiveness on low production costs areEast European countries.

The Asian companies established in Catalo-nia face the future by focusing on offering ori-ginal products with high added value andexpanding sales in other markets. Along thesame lines, as part of the most recent trends, itis necessary to distinguish between the expe-riences of Japanese companies and those ofcompanies from other Asian countries. In thecase of Japanese companies, investment is

channelled primarily into companies in mature in-dustries, such as consumer electronics and theautomotive industry, which show moderategrowth. However, the economies of SoutheastAsia on the one hand, and China and India on theother, continue to grow and their prospects regar-ding FDI in Catalonia continue to be optimistic.

In terms of the strategies, actions and tools usedby the relevant public administrations in the Bar-celona area to attract and retain FDI from Asiancountries, and the opinion the companies fromthese countries have of these strategies, actionsand tools, it is important to point out the effortmade by the Catalan public administrations interms of support for Catalan companies interes-ted in setting up in Asia, such as the work done bythe Catalan office in Shanghai. For Asian compa-nies in the Barcelona area, the economic pro-motion offices created to provide advice to thedifferent candidates interested in setting up inCatalonia is seen as a strong point.

Asian companies are very interested in having in-formation about the process of starting up a com-pany in Catalonia with details about investmentconditions in terms of taxation, work permits, theavailability of office space and the price of diffe-rent production factors. Asian companies also con-sider obtaining employment visas to be a highpriority, given that fact that many of their emplo-yees will be transferred from their home country.

With this in mind, some of the ways consideredimportant to continue promoting the position of

Catalonia as the ideal place for Asian companies toset up are as follows:

• Clearly communicating the region’s competi-tive advantage through long-term campaigns fo-cusing on the promotion of added value inCatalonia compared to competing locations. Inthis regard, before Asian entrepreneurs start ope-rating in Europe, they consider the region to be ahomogeneous unit with no major differences bet-ween countries. There is thus a chance to promotethe Barcelona area as a location with unique fea-tures: good higher education and a high concen-tration of companies working in related andcomplementary activities to foreign companies in-terested in setting up in the region.

• Informing the Asian university populationabout the Barcelona area and Catalonia is alsoconsidered a positive initiative to help strengthenbusiness relations between Catalonia and Asia.Most young Asians who decide to do their uni-versity studies abroad head for the United Sta-tes, while many Indians go to the UnitedKingdom. Making Asians aware of the high-quality training and professional opportuni-ties available in the Barcelona area could helpchannel some Asian students towards Cataloniaand consolidate a critical mass of well-educatedAsians. This highly skilled population group couldthen leverage new investments from their res-pective countries of origin.

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Foreign investment in Mediterranean countrieshas traditionally been in the form of outflowsfrom Catalonia. One of the factors that places theBarcelona area and Catalonia in a good competi-tive position is derived from the fact that manycountries on the Mediterranean perceive Cata-lonia and Spain in general as a platform forentry into Latin America, a region with whichthey generally do not have major economic or cul-tural relations.

Mediterranean countries, especially those in theMiddle East, have shown growing interest incompanies in the field of renewable energies,an industry that has been gaining considerableground in Spain, as discussed above.

For these countries, Barcelona’s image as a cos-mopolitan Mediterranean city is one of the basicattractions when considering future investments.

Companies from Mediterranean countries placespecial emphasis on obtaining visas and workpermits, especially for people entering Catalonia

from the Middle East. The focus placed on thisissue stems from the fact that, for these compa-nies, the speed of these procedures take canaffect their investment decisions.

Another relevant factor is that the headquartersfor the Secretariat of Union for the Mediterra-nean (UfM) has been located in Barcelona andthis is expected to generate additional commer-cial activity in the area. Although it is not antici-pated that this fact will result in a massive flow ofinvestment, the investment that does take placeis expected to be strategic. From the perspectiveof the Barcelona area, the aim is to take advan-tage of the situation to promote the establish-ment of representation offices, sales agents,distributors, etc. Moreover, the fact that Turkeyhas opened a consulate in Barcelona, that Egyptplans to do so in the future, and that Morocco al-ready has one in the city are positive signs thatmay be a result of the presence of the UfM.

THE CASE OF BASF SONATRACH

• On 20 January 2000 the joint venture BASF SONATRACH PropanChem S.A. was created withheadquarters in Tarragona. BASF has a 51% shareholding and the Algerian petroleum and oilpublic company SONATRACH has the remaining 49%.

• The joint venture will build and operate a propane dehydrogenation unit with the aim of produ-cing propene.

CHOOSING THE LOCATION

• The strength of the Tarragona petrochemical area was one of the reasons that attracted the jointinvestment of BASF and SONATRACH to Catalonia.

• The German company BASF has production centres in many European countries. It began ope-rating in Catalonia in 1968 when it set up small production plants. The company’s main aim was tosupply the Spanish market and a small segment of the Italian market.

6.3Mediterranean countries

• Until 2000, BASF’s activity was focused on manufacturing and marketing consumer plastics.Within this context, BASF planned a major investment aimed at building a plant in Tarragonato produce polypropylene, a plastic with many different uses. Because it did not have the rawmaterial (propene) it needed to make polypropylene, BASF had to build another plant to pro-duce propene.

• For the construction of this second plant, BASF joined forces with SONATRACH, which wasseeking a partner with its own technology that would allow the company to position its activityfurther along the production chain. At the same time, BASF needed a strategic partner with itsown sources of energy and access to oil wells in the south.

INVESTMENT OBJECTIVES AND RESULTS

• The decision-making centre of BASF SONATRACH is in Catalonia and its Executive Committeeis made up of four professionals from Tarragona.

• Other companies in the chemicals industry are recreating the same joint-venture model adop-ted by BASF SONATRACH some years ago that has proven successful: an alliance between a mul-tinational and a local partner. Other propene plants with similar capacities are currently being builtin the Middle East.

THE PRESENCE OF THE SECRETARIAT OF THE UNION FOR THE MEDITERRANEAN (UFM) AS AN OPPORTUNITY

• The managers of BASF SONATRACH feel that establishing the headquarters of the Secreta-riat of the UfM is a very positive opportunity when it comes to promoting contacts betweencompanies on either shore of the Mediterranean. The countries on the southern shore are veryinterested in doing business and embarking on long-term collaboration with European coun-tries. It would be very helpful if there were an organization that helped catalyse these connec-tions.

• The countries in the Middle East and the Arabian Peninsula have considerable investment po-tential, given the reserves of natural resources in their subsoil. These countries confirm thatthey are looking for European partners to make progress towards internal stability and gra-dually depend less on the sale of petroleum and natural gas. Investment is ingoing and out-going in this region, because these countries make investments abroad, but also make an effortto attract capital flows. Turkey is also responsible for issuing and receiving investment flows.

INVESTMENT FRAMEWORK IN CATALONIA

• In conjunction with the consolidation of the UfM, BASF SONATRACH considers it important topromote good connections with the southern shore of the Mediterranean, because an increase inthe number of weekly flights to the main cities in North Africa will help create good relationsbetween the two regions.

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The aim of this final section is to compare themost relevant factors for the countries in themajor geographic areas that generate the FDIreceived in Catalonia with regard to the keycontextual variables these countries considerto be the most important when deciding onsetting up or staying in Catalonia. The aim is

to identify the opinions shared by the foreigncompanies established in Catalonia, regardlessof their geographic origin, and to identify themain differences that arise precisely as a result oftheir geographic origin.

6.4Geographic comparison: critical points, challenges and opportunities

TABLE 4. GEOGRAPHIC LOCATION AND CONTEXTUAL FACTORS: EUROPE, THE UNITED STATES AND ASIA

CONTEXTUAL FACTOR EUROPE UNITED STATES ASIA

· Quality of life · Strategic location· Quality of life

· Strategic location· Business communityand production context

· Cost of qualified labour

· Technical training · Business schools available

· Productivity of professionals· Business climate and workculture

· Business climate andwork culture· Employee absenteeism

· Office space and businesscentres

· Office space and businesscentres· Technological infrastructure

· Cultural and sports activities· Supply and quality of public transport

· Leisure and cultural activities· Supply and quality of public transport

Context &Market

Costs

Human Capital

Culture &Context

Infrastructure

ServicesAvailable

· General production costs


· Cost of qualified labour


· Technical training· Business schools available· University programmes

· University-company connections

· Organization of work (timetable flexibility)

CONTEXTUAL FACTOR EUROPE UNITED STATES ASIA

· Legal protectionLegal & Tax Framework

Finance

· Incentives and aid · Access to direct publicaid

· Obtaining visas andpermits

· Obtaining visas andpermits

· Access to venture capital

Source: Individual questionnaires taken by companies and analysed by PwC

· Technical training· Business schools available· University programmes

· University-company connections

· Opinions of supply of better air connections· Office space and businesscentres

· Leisure and cultural activities

When making an overall analysis of enterprisesgeographic origin, it becomes clear that managersand businesspeople agree on certain points thatrepresent the competitive advantage offered bythe Barcelona area and Catalonia, as well as areaswhere an effort should be made to improve theregion’s strategic position.

• The different countries are unanimous aboutidentifying the key factors that make Cataloniaand the Barcelona area competitive: quality oflife and strategic location as a gateway to newmarkets.

• Particularly for countries in Europe and Asia, theregion is less competitive in terms of the costs ofless qualified labour, given the focus of the Cata-lan economy on production industries with greateradded value and increased emphasis on know-ledge and technology.

• In terms of the factors on which the Barcelonaarea and Catalonia should focus to improve theirposition within the framework of attracting FDI,there is a general consensus among the mana-gers of Asian, American and Mediterraneancompanies about the importance of expeditingand optimizing procedures for obtaining visasfor foreigners and work and residence permits.

• According to the managers of European andAmerican companies, the current situation of con-nections between academia and the businesscommunity in Catalonia still shows room for im-provement. Despite the work done in recent years

in this area, these managers feel that workshould continue with the aim of optimizingsynergies and areas for collaboration. In this re-gard, fields in which this connection is managedsuccessfully (as occurs in general in the UnitedStates) could represent a model for learning andprovide the area of Barcelona and Catalonia withexamples of good practice. Moreover, the fact thatthere are top-level managers and entrepreneursfrom the United States and other countries wor-king in Catalonia, along with the presence of otherinstitutions such as business schools and thinktanks, should provide know-how to help optimizeconnections between companies and universitiesin Catalonia.

Finally, with regard to Mediterranean countries,companies from North Africa and especially theMiddle East consider the strategic location of theBarcelona area and Catalonia to be a high priorityas a gateway to markets in Europe and Latin Ame-rica. Likewise, the quality of life in the region isanother strong point for the managers of compa-nies from Mediterranean countries. The areas thatrequire improvement to increase competitivenessinclude the addition of more flights connecting Ca-talonia and the main cities in North Africa, and ex-pediting procedures to obtain visas and otherpermits for foreign workers.

Catalonia’s strong pointsPoints to be worked on to improve competitiveness

BOLD indicates a higher priotity level

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FOREIGN INVESTMENT IN THE BARCELONA AREA AND CATALONIA • FDI PUBLIC POLICY RECOMMENDATIONS

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PricewaterhouseCoopers appreciates the opportunity that Invest inCatalonia-ACC1Ó and the Economic Promotion Area of the Barce-lona City Council have given us to develop the study "Foreign in-vestment in the area of Barcelona and Catalonia”.

The area of Barcelona and Catalonia has a differential competitiveposition to attract foreign investment and a high degree of open-ness of their economies to foreign countries.

In the current global macroeconomic environment, transnational in-vestment aggregate flows have been in a downward trend since thepeak reached in 2007 and 2008, a fact that has increased the com-petition to attract capital.

Therefore, for the area of Barcelona and Catalonia, the efforts tomaintain foreign investments already established in the territoryand to attract new opportunities take special relevance. To enablethis objective, this study has served to identify the following linesof action:

1.Maintaining traditional Foreign Direct In-vestment in mature sectors through:

• Support businesses that put effort on high-valueactivities based on knowledge from already esta-blished sub-sectors and that are investing in tech-nology, logistics, etc…

• Make an effort to maintain current production offoreign companies as a means to locate R&D&iactivities in Catalonia.

• Foster public-private collaboration in a broaderrange of areas: financing technology, infrastruc-ture, transport, logistics, etc…

2.Capture and consolidate the emerging Fo-reign Direct Investment, from:

• Focus on a maximum of 2 or 3 key sectors inwhich the area of Barcelona and Catalonia have aninternationally contrasted competitive advantage.

• Continue to work from the institutions to attractFDI linked to the new economy, particularly in sec-tors such as biotechnology and ICT, through:

• Affecting the competitiveness factors of theenvironment, notably in: infrastructure, humancapital training and a pro-business regulatoryframework. • Providing the means to make a step furtherand ensure the achievement of the sufficientcritical mass to grow the businesses of thenew economy once implanted in Catalonia andespecially thanks to the availability of talentand access to financing. • Encourage entrepreneurial activity andstrengthen the university-business linkage.

3.To facilitate a smooth dialogue betweenAdministrations and businesses throughagents with extensive knowledge of thespecific sectors and businesses through:

• Accompany the companies comprehensively du-ring the processes of implementation and foreigninvestment since the establishment of the activitythrough access to financing, etc…

• Ensure a proper management of the demandsof companies already located in Catalonia, espe-cially in terms of maximum speed of response,provision of a single interlocutor or compilation ofreliable information.

4.Combining a global view with the specifi-cities of a geographic analysis of FDI. Inthis sense, we emphasize the study's con-clusions, which call for:

• In the case of European and American capitalcompanies: improve the dissemination of the exis-ting offer of incentives, enhancing the value of en-trepreneurship and, above all, the public-privatepartnership in emerging sectors.

• In the case of Asian firms: redouble communi-cation efforts of the differential aspects that Cata-lonia offers and the dissemination of successfulstories to induce an attraction effect.

• In general, clearly communicate the strengthsthat Catalonia has, such as: skilled human capital,legal certainty, optimal level of infrastructure andcompetitive know-how both in the traditional andemerging production sectors.

Pablo LópezDirector of Public Sector of Catalonia

PricewaterhouseCoopers

Elena Casas Senior Manager of Public Sector

PricewaterhouseCoopers

FDI PUBLICPOLICYRECOMMEDDATIONS

07APPENDICES

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7.1Study methodology

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FOREIGN INVESTMENT IN THE BARCELONA AREA AND CATALONIA • APPENDICES

The Foreign Investment in the Barcelona Areaand Catalonia study follows a double approachbased on exhaustive fieldwork, aimed at obtai-ning qualitative information about foreign com-

panies in Catalonia, and the complementaryanalysis of other secondary databases.

La denominació genèrica “Inversió Estrangera

The denominated generic form “Foreign Direct Investment” is technically known as FDI or GrossForeign Investment” and includes the following elements:

• Investment flows in companies that are not publicly listed on the stock exchange• Investment flows in listed companies where the foreign investor acquires at least 10 percent ofthe capital of the company (which conventionally is considered a lasting relationship regarding themanagement of the company)• Establishment of new trading companies and their capital increase

Loans between parent companies and their subsidiaries, as well as real estate investments arenot taken into account.

Foreign Direct Investment Greenfield (FDI Greenfield) is the most reliable indicator when consi-dering the impact of foreign investment on the GDP of a country or recipient region. The reasonis that mergers, acquisitions or a mere change in ownership title does not generate GDP alone. Ho-wever, a new production activity does increase the GDP of the particular region that receives theinvestment.

Section 2.2 “Methodological Approach and Con-ceptual Framework of the Study” specifies the ge-ographical scope of the study, as well as the latestand most relevant fieldwork changes in terms ofresearching and gathering information regardingprevious issues. Therefore, methodology has beenstructured in three phases;

a) Identification and in-depth interviews of facili-tating agents (foreign chambers of commerce,consulates, etc.)

b) Organization of discussion groups in the form ofindustry and geographic workshops

c) Secondary data analysis

a) Identification and in-depth interviews offacilitating agents

Facilitating agents are those institutions andkey actors in Catalonia from a foreign investmentpoint of view. Several in-depth interviews withthose agents have been carried out in order to:

• Identify those sectors and companies that aremost relevant and best represent FDI in Catalo-nia, considering their major challenges and fu-ture prospects

• Analyse case-studies about FDI trends in Catalonia

• Define and agree on the workshops’ content,establishing a proper industry and geographicalsegmentation

b) Organization of discussion groups inthe form of industry and geographicworkshops

According to the priorities, strategies and conceptframework established by PwC, a total of 6 FDIworkshops were organized, divided in two maingroups depending on whether they representedFDI in traditional or emerging industries andmarkets.

The in-depth interviews were held with:

INSTITUTION PERSON INTERVIEWED POSITION DATE / TIME

American Chamber of Commerce

Casa Àsia

Institut Europeu de la Mediterrània

French Chamber ofCommerce and Industry in Barcelona

German Chamber ofCommerce in Spain

Chamber of Commerceof Barcelona

Consulate- General ofSwitzerland in Barcelona

Consulate- General ofJapan in Barcelona

Glynis Andrews

Amadeu Jensana

Xavier Albarracín

Véronique OberléPhilippe Saman

Peter Moser

Josep M. Cervera

Silvia Gluber

Yoshihiko Sato

Executive Director

Business Circle Director

Coordinator

Business Service ChiefDirector

Managing director

Internationalization AreaDirector

Deputy Director

Consul

18/3/2009, 11h

19/3/2009, 12.30h

20/3/2009, 10h

19/3/2009, 9h31/3/2009, 16h.

23/3/2009, 9.30h

23/3/2009, 13h

24/3/2009, 10 h

3/4/2009, 10h

TRADITIONAL FDI

WORKSHOP 1Point on the R&D&i value chain: future trends andchallenges

6 COMPANIES SonyYahoo!

7/5/2009, 16 – 18H

General ElectricSEAT

BayerNovartis

01

02

03

04

05

06

07

08

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As a case-study illustrating foreign investment ori-ginated in other Mediterranean countries, an exe-cutive from Basf-Sonatrach was interviewed aswell.

Company questionnaire

The companies that participated in the workshops,along with the companies where personalized in-terviews were held, answered the same ques-tionnaire on the positioning of the Barcelona areaand Catalonia in terms of different factors and con-textual variables. The data taken from these ques-tionnaires were used as the basis for thequantitative analysis that supported the argumentsof the entire study

c) Secondary data analysis

Finally, in relation to the way secondary data wereprocessed, comparable sources that follow thesame guidelines of recording investment in Spainand abroad were used.

• OECD’s Foreign Direct Investment database.

• The Investment Register of the Ministry of In-dustry, Tourism and Trade for figures on volumesof FDI.

• The OCO Monitor database for the number ofFDI projects carried out in the Barcelona area andCatalonia.

• UNCTAD, through the World Investment Re-port, to obtain data on FDI flows worldwide andby country.

In 7.3 the detailed list of all sources used in theprocess-making of this study can be found.

ACC1Ó and the Barcelona City Council contri-buted with valuable materials and publications tocomplete the above mentioned sources, amongwhich stand out:

• Why Catalonia. Ten reasons to invest in• Anual Report on the Industry in Catalonia• The energy sector in Barcelona and Catalonia

Finally, during the composition of this document,PricewaterhouseCoopers has used several owndocuments through which expertise has beenconveyed:

• Supercluster. Ideas, perspectives, and trendsshaping the global impact of the Massachusettslife science industry.

• Cities of opportunity. Business-readiness indi-cators for the 21st century.

• Cities of the future. Global competition, localleadership.

• Innovating through the downturn.

1 Personal interview with Renato Senta, General Director, held 15th June2009, 9h2 Personal interview with Eric Lejeure, General Director, held 122th July2009, 11:30h

WORKSHOP 2Point on the logistics and distribution value chain:future trends and challenges

6 COMPANIES Akzo NobelHenkel Ibérica

11/5/2009, 16H – 18H

Media MarketLeroy Merlin

Pierre Fabre IbéricaScheider Electric España

WORKSHOP 3Specific features of FDI from the United Statesand Canada

6 COMPANIES Delphi Diesel SystemsHP

12/5/2009, 10H – 12H

CitigroupLeroy Merlin

Whirlpool1

Levi Strauss & Co2

TRADITIONAL FDI

WORKSHOP 4Specific features of FDI from Asiancompanies

4 COMPANIES CoscoDenso

13/5/2009, 10H – 12H

Cox & KingsShinning Air Conditioner

WORKSHOP 5Specific features of FDI in emerging industries

13 COMPANIES CPMNurun EspañaRobert BoschSensing & ControlSystems

NTT Europe Online spainSiemensVisual Century ResearchSitec Consulting

YisiosFon YouSustainable EnergySenseit

29/5/2009, 10H – 12H

WORKSHOP 6International entrepreneurs

10 COMPANIES Barcelona DeluxeGigleLinqiaPeace RepublicProcept

The Bright CoBarcelona Minicar ToursEnormoTaxijetKinamik Data Integrity

4/6/2009, 10H – 12H

EMERGENT FDI

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SOURCE PUBLICATION CONTENT LINKS / DATABASE

7.3 Sources used

AENA

Port Authority ofBarcelona

Port Authority of Tarragona

World Bank

Biocat

Chambers of Commerce and/orCommercial Offices

European Commission

Cushman & Wakefield

European Investment Monitor

fDi Intelligence

International Monetary Fund

• Doing Business 2009.Measuring Business Re-gulations.• Foreign InvestmentPromotion Centre• Global Investment Pro-motion Benchmarking2009: Summary

Database of companiesin the countries of origin

Green Paper on Public-Private Partnerships inthe European Union[COM (2004) 327].

Cushman & Wakefield:European Cities Monitor

European InvestmentMonitor 2008 Report

OCO Monitor

Passenger and goodstraffic statistics on

Data on goods traffic andcapacity

Data on goods traffic andcapacity

Statistics on business regulations in 181 countries

Data on the biotech industry in Catalonia

Companies establishedin Catalonia, based oncountry of origin

Number of FDI projects

Macroeconomic development forecasts

www.aena.es

www.apb.es

www.porttarragona.es

www.worldbank.org

www.biocat.cat

www.cushwake.com

www.eyeim.com

www.ocomonitor.com

www.imf.org

2. Introduction to the study and the economicContextFigure 1. FDI Conceptual FrameworkBox 1. Abbreviated Methodology of the Study

3. Current situation of FDI in Catalonia and therest of the world Graph 1. World FDI by Region (2008)Graph 2. Distribution of FDI Attracted at the WorldLevel (2003-2008)Graph 3. Evolution of World FDI and FDI in Catalo-nia in the last ten yearsGraph 4. Evolution of net FDI in Catalonia (2003-2008))Table 1. Number of foreign companies operating inCataloniaGraph 5. Distribution of FDI projects in the Bar-celona area and Catalonia (2003-2008)Graph 6. FDI in Catalonia by field of activity (2003-2008)Graph 7. Industries attracting the most FDI in Ca-talonia (2003-2008)Graph 8. Investment by holding companies andnon-holding companies in Catalonia

4. Traditional FDI in Catalonia: concentrated atkey points along the value chainFigure 2. The value chain and traditional FDIFigure 3. Key factors and actors in traditional FDIGraph 9. Traditional distribution of GDP in Catalo-nia by industryGraph 10. Evolution of employment in major eco-nomic sectors: Catalonia and SpainGraph 11. Industrial investment in CataloniaGraph 12. FDI in Catalonia in traditional sectors(2003-2008)Graph 13. FDI in Catalonia by industry (2003-2008)Figure 4. Strong points of R&D&i in CataloniaGraph 14. Infrastructure in Catalonia and traditio-nal FDI Graph 15. Human capital in Catalonia and tradi-tional FDI Table 2. The opinions of different companies res-ponsible for traditional FDI in Catalonia about con-textual factors: priorities and level of satisfaction Graph 16. Context and markets in Catalonia andtraditional FDI

Graph 17. Investment costs in Catalonia and tra-ditional FDIGraph 18. Work culture and business climate inCatalonia and traditional FDIGraph 19. Services available in Catalonia and tra-ditional FDIGraph 20. The legal and tax framework in Catalo-nia and traditional FDIGraph 21. Financing traditional FDI in Catalonia

5. FDI in emerging industries in Catalonia:attracting talent and reaching critical massFigure 5. Key factors and actors in FDI in emergingindustriesFigure 6. Local and global alliances in FDI in emer-ging IndustriesFigure 7. Availability of technological infrastructureand space in CataloniaGraph 22. Context and markets in Catalonia and FDIin emerging industriesGraph 23. Infrastructure in Catalonia and FDI inemerging industriesGraph 24. Human capital in Catalonia and FDI inemerging industriesFigure 8. The virtuous circle of venture capital in re-lation to emerging industries and FDI Graph 25. Finance for FDI in emerging industries inCataloniaTable 3. The different companies responsible for FDIin emerging industries in Catalonia in terms of diffe-rent contextual factors: priorities and level of satis-factionGraph 26. The cost of investment in Catalonia andFDI in emerging industriesGraph 27. Work culture and business climate in Ca-talonia and FDI in emerging industriesGraph 28. Services available in Catalonia and FDI inemerging industriesGraph 29. The legal and tax framework in Cataloniaand FDI in emerging industries

6. Geographic analysis of FDI in Catalonia

Graph 30. Amount of FDI in Catalonia by regionof originGraph 31. Main investor countries in Catalonia bynumber of companies (2008)Table 4. Geographic location and contextual fac-tors: Europe, the United States and Asia

7.2List of figures, tables and graphs

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7.4 Glossary of Terms

Barcelona area

Cluster

Holding companies

FDI

New economy

GDP: Gross domesticproduct.

R&D&i:

The geographic area made up of the city of Barcelona and the adjacentcounties: Barcelonès, Maresme, Garraf, Baix Llobregat, Vallès Orien-tal, Vallès Occidental and Alt Penedès.

The concentration of similar, related or complementary companies ina single geographic area that have active channels designed forcarrying out commercial transactions, communication and dialoguebetween them. Within the same cluster, these companies also sharespecialized infrastructure and the same labour and services market,and also face similar opportunities and threats.

Holdings are companies set up in Catalonia with the main aim of hol-ding the shares of companies operating abroad. Holding companiesare instrumental in that they are set up based on strategies to opti-mize the tax situation within a business group. In many cases, their in-vestments do not have direct economic effects because they merelyinvolve the transfer of financial assets.

Foreign direct investment, also known as gross foreign investment. Itcan be divided into two groups:• Effective FDI. Investment that leads to an increase in a country’sproduction capacity, including establishing and expanding installed ca-pacity. • Mergers and acquisitions. Investment in mergers and acquisitionsthat involve capital flows, but that do not change the country’s pro-duction capacity.

Also known as the knowledge economy or the digital economy, it isdominated by information. In this new context, companies are valuedmore highly for their ideas, information and know-how than for theirtangible assets.

Market value of the final goods and services produced by an economyin a specific period of time.

Research, development and technological innovation. Spending onresearch, development and technological innovation activities.

SOURCE PUBLICATION CONTENT LINKS / DATABASE

IBM Plant LocationInternational

Catalan FinanceInstitute (ICF)

Catalan StatisticsInstitute (IDESCAT)

Institute for EnergyDiversification andSaving (IDAE)

Spanish National Sta-tistics Institute (INE)

Ministry of Industry,Tourism and Trade

Organization for Economic Cooperation and Development(OECD)

Industrial EconomyPapers

UNCTAD

Directory of companiesin renewable energies

Spain RegionalArrounting

Investment Register

• Benchmark definitionof foreign Direct Investment, 4th edition• Checklist for foreignDirect Investment incentive policies

• “Map of local indus-trial production systemsin Catalonia”. Economypapers no. 21• “The new industry:the core sector of thecatalan economy” In-dustrial economy papersno. 26

World Investment Report 2008

Basic statistics on Catalonia

Gross and net foreigninvestment flows

World foreign investmentflows

www.ibm.com/bcs/pli

www.icfinances.com

www.idescat.cat

www.idae.es

www.ine.es

www.oecd.org

www.gencat.cat/diue

www.unctad.org

Foreign Investment in the Barcelona and Catalonia area

Business

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