Public Disclosure Authorized TRADE, INVESTMENT AND COMPETITIVENESS Public Disclosure Authorized Public Disclosure Authorized EQUITABLE GROWTH, FINANCE & INSTITUTIONS NOTES National-Subnational Coordination for Public Disclosure Authorized Investment Attraction: The Case of Spain María Jesús Fernández, Adrián Blanco, and Yago Aranda Larrey © 2021 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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The risk of claims resulting from such infringement rests solely with you. If you wish to reuse a component of the work, it is your responsibility to determine whether permission is needed for that reuse and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, figures, or images. All queries on rights and licenses should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; e-mail: pubrights@worldbank.org. Photo Credit: Pixabay Design and Layout: Amy Quach / FPS Groups >>> Contents Background 3 1. Introduction and Objectives 4 2. A Framework for National-Subnational Coordination: Evidence from Research and Global Operational Experience 5 3. Spanish Decentralization and Investment Promotion Policies 10 The case of Spain: A successful story of national-subnational coordination to the benefit of international investors 8 Coordination mechanisms and tools 9 ICT coordination tools: Interactua 11 Complementary initiatives and instruments of collaboration between administrations: Subnational Doing Business, Barometer and European aid 12 4. Conclusions and Lessons Learned 14 References 16 NATIONAL-SUBNATIONAL COORDINATION FOR INVESTMENT ATTRACTION: THE CASE OF SPAIN <<< 1 2 >>> NATIONAL-SUBNATIONAL COORDINATION FOR INVESTMENT ATTRACTION: THE CASE OF SPAIN >>> Background Although the topic itself is not a new one, interest in study- national-subnational collaboration for investment promo- ing investment attraction has significantly increased in re- tion has emerged that combines legal, institutional mecha- cent years. Governments, both national and subnational, nisms and Information and communications technology have long been interested in ways to promote investments (ICT) tools to achieve success. This case study aims to and overcome the barriers to job creation and economic document the emergence and evolution of this national- growth that confront their jurisdictions. subnational institutional coordination model. It attempts to distill practical lessons from the Spanish experience for This paper is part of the broader World Bank Group stakeholders in emerging economies who are working to (WBG) research initiative on Investment Climate matters, improve their own mechanisms for investment promotion. managed by the Finance, Competitiveness and Innova- To produce these lessons the WBG Investment Climate tion (FCI) Global Practice of the WBG. Its objective is to Unit partnered with ICEX-Invest in Spain, the national trade create a knowledge base in the investment policy and and investment promotion agency. promotion arena to help governments address questions on effective policies, by understanding what has worked This paper was prepared with valuable contributions elsewhere and what has not, and on how to organize for from María Jesús Fernández (Former Executive Director, delivery in different contexts. ICEX-Invest in Spain) and Adrián Blanco Estévez (Man- ager Finance Unit, ICEX-Invest in Spain), with additional Spain is home to many international investors. The Mediter- technical inputs and guidance from Yago Aranda Larrey ranean country is the 12th largest recipient of accumulated (Private Sector Specialist, Finance Competitiveness and foreign investments in the world, and 5th in the European Innovation, WBG) and key support from Alex Sanchiz (In- Union, highlighting the major role of foreign investment in vestment Policy and Promotion Consultant, WBG). The its economy and its strong institutional framework.1 This team would also like to thank the UK Prosperity Fund for was not always the case. As recently as the early 1980s their support in conducting research on this topic, and the the presence of multinationals in many sectors was very World Bank Group professionals with whom we have been limited. Over the past forty years, a “Spanish model” of fortunate enough to collaborate in preparing this study. 1 See World Investment Report 2020 (based on 2019 data) (2020a). NATIONAL-SUBNATIONAL COORDINATION FOR INVESTMENT ATTRACTION: THE CASE OF SPAIN <<< 3 >>> 1. Introduction and Objectives Foreign direct investment (FDI) is an important source of infrastructure and skills, access to transportation hubs, capital for economic growth in developed and developing availability of support services, professional and academ- countries. Not only does FDI generate jobs and economic ic training, and proximity to relevant institutions. In many growth, it can also trigger highly desirable positive exter- country cases, it makes sense to have both national and nalities such as more advanced technologies and stron- subnational investment promotion bodies, but in those ger management capabilities, which are often in great de- cases, coordination is key for success.9 mand in developing countries.2 FDI can also have positive multiplier effects for the economy in the form of additional There are many countries, usually of significant size and jobs created through forward and backward linkages with high levels of government decentralization, where the na- domestic enterprises,3 including employment opportuni- tional IPA, which depends on the Central Administration, ties in supporting sectors (such as business services, re- coexists with subnational IPAs or investment promotion tail, essential supplies and others). It also increases the units. These subnational IPAs reside within regional gov- productivity of the multinational corporations (MNCs) do- ernments, or even belong to lower administrative levels mestic affiliates,4 and contributes to integration in global such as municipalities. This coexistence requires strong value chains (GVCs).5 collaboration and coordination between the different ad- ministrations in implementing investment promotion ac- Given FDI’s key role in economic development, govern- tivities, as well as a clear distribution of functions and ments have implemented numerous actions to draw such roles at different stages. Building a coherent institutional investment into their territories. One of the most impor- framework for investment is crucial to FDI effectiveness, tant has been setting up Investment Promotion Agencies and the institutional coordination guidelines and protocols (IPAs). IPAs6 operating at both the national and subna- are the main tools for these entities to succeed. tional levels have proliferated over the past two decades. Existing evidence shows that, when properly designed, This paper has three objectives: First, to understand bet- staffed and mandated, IPAs can play a key role in attract- ter the rationale behind having national and subnational ing, retaining, and growing investment.7 The contribu- IPAs. Second, to shed light on how national and subna- tions of IPAs are usually more pronounced in developing tional IPAs can cooperate to attract FDI. And third, to take countries, where investors on many occasions know less a closer look at specific mechanisms that can generate about the location, reliable information may be scarce and significant synergies, benefits and opportunities for the regulatory environments more challenging.8 host economies. In all cases this note draws on the ex- ample of the collaboration between the different Spanish When thinking about investment promotion bodies and lo- national and regional administrations, a successful model cations, the general public usually imagines country-wide showing how coordination efforts result in an improve- policy and national-level institutions. However, FDI is usu- ment of the efficiency and effectiveness of overall invest- ally closely linked to urban areas. Urban areas provide ment policy and promotion efforts. investors with agglomeration benefits, such as access to 2 The UNCTAD 2018 World Investment Report estimated that MNE’s foreign affiliates contributed to US$ 257 Billion of total value added (8 percent increase from previous year) and 76 million of total employment worldwide (annual growth rate of about 3 percent). 3 In the automobile industry in India, for every 100 jobs generated in automobile manufacturing, 300 more jobs are generated in auto-com- ponent and body-building manufacturing. Additional jobs are generated through auto services (such as dealerships, auto finance and auto insurance). See Bhasker (2013). 4 See Saurav and Kuo (2020). 5 See World Bank World Development Report (2020b). 6 IPAs across the world differ significantly in budget, size, legal set up or mandate, however they share the mission of promoting and increas- ing the attraction of FDI. 7 See World Bank Global Investment Competitiveness Report (2020a). 8 See Harding and Javorcik (2011). 9 See World Bank Global Investment Competitiveness Report 2020, chapter 5 (2020a). 4 >>> NATIONAL-SUBNATIONAL COORDINATION FOR INVESTMENT ATTRACTION: THE CASE OF SPAIN >>> 2. A Framework for National-Subnational Coordination: Evidence from Research and Global Operational Experience Many countries have a national IPA that must coordinate and establishment in a location, and eventually lead to with subnational IPAs and with other relevant agencies supporting its retention or expansion. IPAs should also to ensure that investors’ needs are satisfied. IPAs are foster investor linkages and spillovers with the domestic essentially specialized marketing and service-providing economy, and they may need to help manage eventual agencies. Their focus lies in (a) identifying potential in- transitions or divestments. vestors through articulating a convincing case for locating The most important services that IPAs should provide can in their country or subnational location (that is, generate be classified into four categories, according to the World investments and build the location’s image) and (b) pro- Bank’s Comprehensive Investors Services Framework.10 viding high-quality, on-time services to prospective and established investors (for example, facilitate, retain and These four categories are marketing, information, assis- expand investments). tance, and advocacy. These services should be provided across the four stages of the investment life cycle (see From an IPA’s perspective, investor services begin with Figure 1, below). This approach allows IPAs to establish the proactive generation of an investment lead (the at- long-term relationships with investors, thereby maximiz- traction stage), progress to supporting the investor’s entry ing opportunities for investment, reinvestment, and em- bedding. See Figure 2. FIGURE 1 - The investor lifecycle PLAN (define businesss needs) Host country location stages Attracting By enhancing the overall investment investors climate, promoting the location and TRANSITION EXPLORE supporting investor’s planning and exploration Linkages and Attraction Spillovers Assisting their By providing a transparent and entry and predictable legal environment, and EXPAND VALIDATE establishment delivering information and assistance DIVERSITY IPA LOCATION services LINK SELECTION Retention Entry Securing their By ensuring that investors operate and and Expansion Establishment retention and without sudden legal and regulatory expansion changes, and by assisting investors during operations and expansions OPERATE ESTABLISH Fostering By looking for win-win benefits for linkages and both the investor and domestic spillovers economy Investor’s project cycle Host country location cycle Source: Investment Climate Unit, World Bank Group. 10 The Comprehensive Investor Services Framework (CISF) is a novel WBG framework that explores the different areas of the IPAs investor services offering per the different stages of the investment lifecycle. For more information please see the following WBG In Focus note: Comprehensive Investor Services Framework (Heilbron and Aranda-Larrey, 2020). NATIONAL-SUBNATIONAL COORDINATION FOR INVESTMENT ATTRACTION: THE CASE OF SPAIN <<< 5 FIGURE 2 - Comprehensive Investor Services Framework matrix Stages Entry Retention Linkages Attraction and and and Category establishment expansion spillovers Marketing ✔ ✔ ✔ Information ✔ ✔ ✔ ✔ Assistance ✔ ✔ ✔ ✔ Advocacy ✔ ✔ ✔ ✔ Source: Investment Climate Unit, World Bank Group According to global surveys of IPAs, the coordination by the presence of inadequate institutional coordination needed between national and subnational IPAs for the mechanisms and lack of clarity in the distribution of func- effective implementation of investment promotion ac- tions between different bodies. Furthermore, 59 percent tivities is often absent. The recent State of IPAs report, of the IPAs surveyed desire better institutional coordina- undertaken in 2020 by the WBG in partnership with the tion in their countries. See Figure 3. World Association of Investment Promotion Agencies (WAIPA)11, found that 55 percent of responding national Well-coordinated, complimentary national and subnational IPAs are key to avoiding downstream problems for inves- IPAs maintain close or regular contact with their subna- tors and the duplication of services. For example, it is more tional agencies, despite nearly all IPAs use coordination efficient for the national IPA to dedicate resources to na- mechanisms with other entities such as memoranda of tional branding and overall marketing efforts, especially understanding (MoUs) or regular inter-agency meetings. when dealing with investors abroad. On the other hand, Nevertheless, IPAs still face significant obstacles in their day-to-day problem-solving for an established investor can institutional coordination efforts: 65 percent cite having be better dealt with at the subnational level.12 Table 1 below unresponsive partner entities, and 64 percent cite the shows a few general examples of regulation and proce- absence of mandate or power to ensure effective coop- dures that are decided by different levels of government. eration. Some obstacles faced by IPAs may be explained FIGURE 3 - Reforms desired by IPAs Better Institutional coordination 59% Better strategic alignment 44% More streamlined regulations 43% Smarter incentives 38% Stronger institutions dealing with investors 33% Better linkages with domestic suppliers 31% Better services to investors 26% Friendlier visa and work permit regime 23% More openness to foreign direct investment 22% More open private sector participation 17% Better investment protections 14% More open trade 9% 0% 10% 20% 30% 40% 50% 60% 70% % of IPAs Source: Sanchiz, Alex; Omic, Ahmed. 2020. World Bank Group. 11 See Sanchiz and Omic (2020). 12 See World Bank Global Investment Competitiveness Report 2020, Chapter 5 (2020a).and body-building manufacturing. Additional jobs are generated through auto services (such as dealerships, auto finance and auto insurance). See Bhasker (2013). 6 >>> NATIONAL-SUBNATIONAL COORDINATION FOR INVESTMENT ATTRACTION: THE CASE OF SPAIN TABLE 1 - Investment-related regulations by national vs. subnational administrations The overall legal and regulatory framework for FDI is typically determined at the national level. Subnational entities must function within these frameworks. Examples of regulations, policies and administrative procedures at both levels include: National Subnational Trade/Investment agreements Local one-stop shops Export/Import licenses Construction permits Customs Technical certificates Visas Environmental requirements Company registration Activity licenses Foreign purchase/ lease of land permits Property registration Sector incentives Land use certification FDI sector restrictions Local incentives Income taxes • Subnational entities can advocate central government for changes/improvements in conditions for FDI decided at the national level (for example, customs, export/import licenses, visas, and so on). • Subnational IPAs, however, may have strong role in fast tracking investment procedures at the local level, for example, company start up licenses, construction and environmental permits, and so on. Source: Zhu, Tingting Juni; Aranda Larrey, Yago; Santos, Valerie Joy Eunice. 2015. World Bank Group. In creating a country level effort for investment promotion, Subnational and national IPAs conduct similar activi- protocols should be in place to avoid “race to the bottom” ties and share the general objectives of FDI promotion behavior within the national jurisdiction, such as subna- to boost economic growth and development. However, tional IPAs competing for the same investors on the basis subnational IPAs, due to their focus on a more specific of aggressive fiscal incentives or other type of subsidy. location, have a deeper understanding of that location’s strengths and weaknesses and can therefore provide very The national IPA is usually best placed to coordinate and specific assistance to international investors. Attention to interact with investors during the early attraction stages detail and to the specific characteristics of the location but could taper its role once investors become specifically (sector specialization, Free Trade Zones available, and interested or established in a particular location, espe- so forth) can be key factors in promoting specific choices, cially if there is a subnational IPA that can take over in especially during investors’ final decision-making process maintaining the relationship and servicing the investor. and their entry stages, should they decide to invest. See Figure 4, below. FIGURE 4 - Proposed division of national and subnational IPA roles for service delivery Investment Life cycle stage Stages Entry Retention Linkages Attraction and and and Category establishment expansion spillovers Marketing Information Subnational IPA Assistance National IPA Advocacy Source: WBG Global Investment Competitiveness Report 2019/2020, (2020b). NATIONAL-SUBNATIONAL COORDINATION FOR INVESTMENT ATTRACTION: THE CASE OF SPAIN <<< 7 >>> 3. Spanish Decentralization and Investment Promotion Policies Over a period of nine years, the CCAAs established their governments and administrations, and the central gov- ernment transferred services and economic resources to the regional governments. This transfer of powers, which has accelerated in recent years, has made Spain one of the most decentralized countries in the world. According to the Regional Authority Index,15 Spain is the second most decentralized country among the 81 analyzed, only behind Germany. The case of Spain: A successful story of national-subnational coordination to the benefit of international investors In only thirty years, Spain evolved from a state with a While Spain has one of the highest levels of administrative highly centralized territorial model to a multi-layered decentralization in the world, it is also very active in under- federal state that consists of the national government, taking investment promotion efforts. These efforts are exe- the autonomous communities (hereinafter CCAAs13) cuted by the national IPA, ICEX-Invest in Spain, dependent and local government. Spain’s current administrative on the Ministry of Industry, Trade and Tourism, as well as structure originated in the Spanish constitution of 1978, by the different subnational IPAs operating in the country. which allowed for the establishment of self-governing In order to respond to the need for coordination, ICEX-In- entities, each having its own statute of autonomy. Apart vest in Spain, in conjunction with subnational IPAs, have from different historical and political factors, the cre- developed several mechanisms, tools and activities that ation was based on the recognition of a greater degree have enabled good collaboration between the central gov- of effectiveness in providing specific services at the ernment and the regional governments. This efficient col- subnational level. laboration has resulted, among other advantages, in an The constitution established the powers given to the cen- improvement in the services offered to foreign companies. tral government, stating that the CCAAs could assume The following sections of this note will provide more de- those powers not explicitly assigned to the central gov- tails about this successful example of national-subnation- ernment in their constitutions. It also recognized that the al collaboration. central government can delegate powers to these sub- national entities, and that in certain cases it could enact Although, in general, the transfer of competences affects laws to homogenize matters falling under their purview, the fields of education and health, there are other impor- while ensuring that—should there be a conflict—national tant areas in which the CCAAs have prominent space for legislation would always prevail over that of a CCAA.14 action, such as economic development policies. These 13 CCAA stands for “Comunidades Autónomas”, Autonomous Communities in English. 14 See Viver Pi-Suñyer (2010). 15 The Regional Authority Index (RAI) is a measure of the authority of regional governments in 81 democracies or quasi-democracies on an annual basis over the period 1950-2010. The dataset encompasses subnational government levels with an average population of 150,000 or more. Regional authority is measured along ten dimensions: institutional depth, policy scope, fiscal autonomy, borrowing autonomy, representation, law making, executive control, fiscal control, borrowing control, and constitutional reform. 8 >>> NATIONAL-SUBNATIONAL COORDINATION FOR INVESTMENT ATTRACTION: THE CASE OF SPAIN BOX 1 - Investment-related Regulations by National vs. Subnational Administrations ICEX Spain Trade and Investment is a public corporation at the national level created in 1982. Its mission involves promoting the internationalization of Spanish companies to support their competitiveness and add value to the economy, as well as attracting foreign investment to Spain. It is part of the Spanish Ministry of Industry, Tourism and Trade. Invest in Spain is an Executive Directorate of ICEX Spain Trade & Investment, a Government Body chaired by the Secretary of State for Trade. Its core mandate is to attract FDI to Spain by promoting the country as a competitive investment location. The services it provides include information, advice and support to industrial and financial investors interested in the Spanish market. Invest in Spain serves as point of access to central and regional administrations, and to potential local partners. It renders its services through a network of 31 Provincial and Regional Divisions in Spain along with almost 100 Economic and Trade and Investment Offices around the world. It also boasts 16 Business Centres worldwide, offering Spanish companies temporary infrastructure and acting as incubators for internationalization. comprise a wide range of activities, such as articulating When it comes to marketing and image building, the coop- an industrial policy or designing public aid to the private eration implies putting together homogeneous messages sector according to the needs of companies operating in that clearly present the country’s advantages as a destina- different sectors. One area that has gained prominence in tion for FDI and include the specificities and strengths of the recent years are the policies related to the promotion of different CCAAs. On the advocacy front, the responsibili- investments, channeled through different IPAs or invest- ties regarding different elements that affect the investment ment promotion units that have been established in all climate and impact foreign companies are divided between Spanish CCAAs. See Figure 5. the Central Administration and CCAAs. For example, rules that are applicable in areas such as taxes, labor issues or In Spain, investment promotion policies rest both on the business incorporation regulations belong to the General Central Administration and the CCAAs and involve a clear Administration of the National Government. But competen- distribution of tasks as well as adequate communication cies such as land or environmental policy are in the hands and coordination between administrations. This affects of the CCAAs or municipalities. In this context, ICEX-Invest investment attraction, entry and establishment, and reten- in Spain, has sought to create a joint response, supported tion and expansion stages, and involves the development by the subnational IPAs, that accommodates the differ- of a complementary service offering by both national and ent areas of competence, with the aim of providing better subnational IPAs to ensure investors are accompanied by service to foreign investors while ensuring cooperation be- a competent and reassuring guide during their journey. tween the different Spanish administrations. FIGURE 5 - Spain’s CCAAs and their IPAs or Coordination mechanisms and tools Investment Attraction Units Coordination between the Spanish Central Government and the CCAAs in the attraction and promotion of for- eign investment has materialized through various initia- tives. The main coordination tools between ICEX-Invest in Spain and the CCAA’s investment promotion bodies are: The Investment Attraction Committee (CAI), the Interac- tua ICT tool, and other key joint initiatives. The legal framework that sets out the foundations for the coordination is the Law 6/1997, Organization and Function- ing of the General Administration of the State, which estab- Source: ICEX-Invest in Spain. lished the Interterritorial Council for Internationalization16 (CII) creating a framework for permanent collaboration be- 16 For additional details see: https://www.icex.es/icex/wcm/idc/groups/public/documents/documento_anexo/mde4/nzkw/~edisp/dax2018790062.pdf 17 http://www.investinspain.org/invest/en/regions/index.html. NATIONAL-SUBNATIONAL COORDINATION FOR INVESTMENT ATTRACTION: THE CASE OF SPAIN <<< 9 tween the State Administration (AGE), the CCAAs17 and • Facilitating collaboration between the different institu- the private sector. The objectives of the CII are as follows: tional representations abroad (economic and commer- cial offices, representatives of the CCAAs and Cities, • Establishing a framework of permanent collaboration bilateral Chambers, and other relevant bodies). between actors driving internationalization that allows: (i) the use of economies of scale; (ii) the projection of The CII has two Committees, an Internationalization Pro- Spain’s image abroad, in order to minimize the costs of motion Committee18 and an Investment Attraction Com- penetration into the international market. mittee (CAI) (See Figure 6). • Advancing strategic collaboration, setting joint objectives The CAI, exclusively focused on attracting investments to and establishing policies and action plans to achieve them. Spain, was created in 2006, with the aim of creating a framework for permanent inter-administrative collabora- • Articulating collaboration in the promotion of goods, tion. Today, the CAI plays primarily an executive role—the services and investments abroad. key to its success—and its members are mainly ICEX- • Promoting collaboration for the development of joint Invest in Spain (which serves as permanent Secretariat), programs and activities, the design of shared promotion and the Investment Promotion Agencies of the CCAAs. models, as well as the exchange of information on the All the Spanish CCAAs are represented,19 participating respective policies and actions regarding the promotion actively in the meetings that take place every six months, of goods, services and investments abroad. each time in a different CCAA. • Institutional cooperation in the area of FDI attraction, Over the years, the CAI has become the main channel of creating a forum for collaboration and participation for communication between the different administrations and this purpose. the forum in which they discuss investment promotion is- sues in detail. Among the many aspects covered, joint pro- FIGURE 6: Spain’s Interterritorial Council for Internationalization (CII) Interterritorial Council for Internationalization (CII) Plenary Council Committees Technical Secretary Internationalization Promotion Committee Investment Attraction Committee (CAI) Member of the Ministry of Industry, Tourism and Trade President, Regions (CCAA) Vice President Working Groups and Secretary Spanish Confederation of Business Organizations (CEOE) Superior Council of Chambers of Commerce, Industry and Navigation Source: ICEX-Invest in Spain. 17 http://www.investinspain.org/invest/en/regions/index.html. 18 This committee has the objective of promoting Spanish goods, services and investments in foreign markets. 19 Participating agencies are: IDEA/EXTENDA (Andalucía), AREX (Aragón), IDEPA (Asturias), IDI (Balearic Islands), PROEXCA (Canary Islands), SODERCAN (Cantabria), ADE (Castilla y León), IPEX (Castilla la Mancha), ACC1Ó (Catalonia), IVACE (Valencian Region), Invest in Extremadura (Extremadura), IGAPE (Galicia), ADER (La Rioja), Invest in Madrid (Madrid), INFO (Murcia), SODENA (Navarra) and SPRI (País Vasco). 10 >>> NATIONAL-SUBNATIONAL COORDINATION FOR INVESTMENT ATTRACTION: THE CASE OF SPAIN motion activities abroad, technical workshops, business IPAs, as well as joint activities, for which communication and missions, improvements of the investment environment coordination mechanisms are needed. In order to create and and the analysis of sectors hold prominent places. For ex- enable these instruments, ICEX-Invest in Spain developed ample, in distant markets where some Spanish CCAAs are an ICT platform in 2007, Interactua. This platform, an inno- not very well-known, joint promotional actions have been vative CRM-type software that integrates key stakeholders, carried out, which favors positioning strategies. This is the has become a fundamental tool in the articulation of ICEX- case for China, where joint initiatives have taken place Invest in Spain and CCAA IPAs interrelationships. to participate in the CIFIT (China International Fair for In- Interactua allows the joint management of numerous ac- vestment & Trade), COFAIR (China Overseas Investment tivities related to investment projects, the management Fair) or CISMEF (China International Small and Medium of investment promotion activities, and the exchange of Enterprises Fair). Further, other initiatives also involve na- information (news, documentation or databases, among tional-subnational collaboration, such as in the promotional others). The most attractive functionality of this platform is and information provision field (for example, ICEX-Invest a mechanism to announce foreign investors’ expressions in Spain created its Guide for State Incentives and State of interest to establish in Spain received by ICEX-Invest Aid, and its website includes relevant data and market in- in Spain, and its subsequent dissemination through the telligence on the different CCAAs). Additionally, two CAI platform between the CCAAs. working groups were launched in 2015: (i) good practices in attracting FDI, in which actors share experiences and Interactua helps communicate and coordinate with the lessons learned in the design and implementation of public potential investment projects that come through ICEX- programs and initiatives; and (ii) the automotive group; a Invest in Spain, making the announcement of the po- sector of great importance to the Spanish economy, which tential investment project in Spain under the criteria of is the second largest European vehicle manufacturer main- confidentiality with respect to the client and transparency ly due to the strong presence of foreign companies. with respect to the CCAAs, ensuring that the latter are all informed of the investment opportunities via this platform. ICT coordination tools: Interactua Once the project information is received, the CCAAs can Coordination in the management of foreign investment proj- submit their proposals for attracting the foreign company ects involves action by both the national IPA and CCAAs’ by presenting their value propositions as potential loca- NATIONAL-SUBNATIONAL COORDINATION FOR INVESTMENT ATTRACTION: THE CASE OF SPAIN <<< 11 tions for a specific investment project. They are the most Business and Barometer. Further, the IPA contributes to knowledgeable when it comes to providing location- and the design, promotion and management of European aid locale-specific details of critical interest to foreign inves- (that is, the Smart Technology Fund). tors, such as physical location options, access to local tal- ent or contact with local partners. • The Subnational Doing Business project was carried out in 2015,22 with a great involvement and mobilization Interactua is therefore a good example of the necessary of actors by ICEX-Invest in Spain. Its objective was to complementarity between administrations regarding carry out an analysis of the regulations of the Spanish service-provision to the foreign investor as well as the CCAAs based on the Doing Business methodology of importance and advantages of collaborating with them the World Bank. to strengthen the overall location offering presented to • Over the last eleven years, ICEX-Invest in Spain, to- the sought investor. Ultimately, Interactua generates gether with a Spanish business school and a busi- value for the foreign investors, who may be naïve as to ness association,23 have been conducting an annual the differences between locations in-country, and at the survey of foreign companies in Spain. Their aim is same time strengthens fair competition between CCAAs, to assess the business climate, identify existing which have to put together strong and clear value prop- ositions to win a project. ICEX-Invest in Spain acts as strengths and weaknesses, and obtain investment the primary gateway for many foreign investment proj- and job creation prospects from multinationals. Fur- ects into Spain and its intense promotional activity ends ther, ICEX-Invest in Spain works together with the up generating leads that ultimately benefit the CCAAs, CCAA of Andalusia for a specific subnational level ex- where the projects will eventually be established. Since ercise. A total of 120 foreign companies established the inception of the platform and until the end of 2019, in Andalusia are surveyed to identify those differen- a total of 695 projects have been managed through the tial aspects that they consider positive, such as in- platform.21 See Box 2. frastructure, quality of life, human capital and market size, as well as relevant areas for improvement. Complementary initiatives and • ICEX-Invest in Spain manages European regional de- instruments of collaboration between velopment aid for the establishment of foreign compa- administrations: Subnational Doing nies engaged in R&D activities in certain CCAAs. ICEX- Business, Barometer and European aid Invest in Spain, through the design and management of the program,24 channels European aid into CCAAs In addition to the previous investment promotion efforts, that, because of the special development needs of their several initiatives have been carried out between ICEX- territories, are eligible to receive assistance25 from Eu- Invest in Spain and the IPAs of the CCAAs in recent ropean Regional Development Funds (ERDF). These years. Acknowledging their important role in connect- funds help strengthen and anchor the private sector to ing investors and policymakers, two were in the field of the territory, encourage the development of higher qual- knowledge generation and policy advocacy, which recent ity investments, and better position the CCAA in front of WBG research indicates is the service most valued by potential foreign investors. investors.21 These initiatives are the Subnational Doing 20 Interactua has been recently integrated into a new Customer Relationship Manager (CRM) system. ICEX-Invest in Spain is working to ensure a smooth transition to this new tool to be able to provide all the services that were provided by the previous set up. 21 bid. no. 12 22 For additional information see: https://espanol.doingbusiness.org/en/reports/subnational-reports/spain 23 IESE Business School and the multinational business association “Marca España” participated in the last barometer. For more information see: https://multinacionalesmarcaespana.org/barometro-del-clima-de-negocios-en-espana-desde-la-perspectiva-del-inversor-extranjero-resulta- dos-2019/ 24 For additional details see: http://www.investinspain.org/invest/en/resources/information-services/erdf-funds-for-r-d/index.html 25 The financial aid is granted under co-financing and non-reimbursable grants up to EUR 200,000 per project. 12 >>> NATIONAL-SUBNATIONAL COORDINATION FOR INVESTMENT ATTRACTION: THE CASE OF SPAIN BOX 2 - Cases of Cooperation between ICEX-Invest in Spain and CCAAs Amazon Web Services (AWS): The US company, dedicated to providing cloud services for the Amazon group, and widely used by other important platforms such as Dropbox or Foursquare, contacted ICEX-Invest in Spain to explore the possibility of making a new investment in Spain to develop three new technological centers. With the various value propositions offered by the CCAAs received by Amazon through Interactua, the client analyzed which one would better satisfy the project needs and decided where to locate the project. From there, an intense collaboration began between ICEX-Invest in Spain and the specific CCAA where Amazon finally decided to establish the project. In this case, the IPA worked together with the CCAA of Aragon and the Subnational IPA (Aragón Exterior) for three years while preparing the final package for the company, showing the benefits derived from complementarity between the IPAs. Some of these services and activities, which reflect joint accompaniment during the life of the project, were the provision of strategic advice and information on national state and regional regulations, incentives, plant location, land regulations, and access to different key players in the public and private sector. AWS’ centers will be established in different locations of the Aragon CCAA in 2022, with an estimated investment of EUR 2.5 billion, generating 1,500 jobs. Nokian Tyres: The Finnish company with over a century of experience in the tire manufacturing industry, met ICEX-Invest in Spain showing interest in opening an R&D center in Southern Europe. The company needed to find a well-connected location with warm temperatures for tire testing facilities. Again, the client made the localization decision based on the value propositions from the different CCAAs received through the Interactua platform. From this point, the collaboration for the development of the project started. ICEX-Invest in Spain and the CCAA, Castilla la Mancha in this case, worked together for the successful establishment of this leading company. AOM and Genestore: The Argentine agricultural multinational AOM specialized in the production of plant phytosterols, chose the Valencian CCAA to enter the European market, establishing a new factory on a 30,000 m2 plot; the biotechnology Indian multinational Genestore, specialized in the application of large- scale genomic data, has recently established in the CCAA of Andalusia. NATIONAL-SUBNATIONAL COORDINATION FOR INVESTMENT ATTRACTION: THE CASE OF SPAIN <<< 13 >>> 4. Conclusions and Lessons Learned The coexistence of national and subnational IPAs is very Building and maintenance of trust among a diverse 2. common in large and decentralized states. These two range of relevant stakeholders; types of investment promotion bodies can support a coun- Adherence to a set of design and management prin- 3. try’s overall FDI objectives and allow its territories to pro- ciples supported by specific tools and instruments vide comprehensive services and specialized assistance (specialized committees, ICT tools, working groups) to both prospective and existing investors. However, a including governance, people and organization, admin- model that ensures complementarity and coordination istration, plan, design and funding; and must be put in place. 4. Results-focused execution that puts the principles into The success of the Spanish model can be attributed to practice on a day-to-day basis and delivers superior collaborations between key stakeholders in which each results. of them performs the role best suited to its expertise, and where there is alignment around the shared interest of The professional capacity of government staff, including attracting more and better FDI into the national territory. their ability to communicate national and subnational val- Maintaining the buy-in and shared vision of these national ue propositions are very important for foreign investors. and subnational stakeholders was critical not only during Governments’ overall responsiveness to inquiries, and the founding stage of Spanish investment promotion or- their knowledge of subnational offerings to match foreign ganizations, but also at each phase of the model’s evolu- firms’ due diligence is key. An important element of loca- tion. The importance of a stable, supportive stakeholder tion-choice decisions is the human-interaction dimension coalition should not be underestimated. during the final stage of investor attraction as well as in the entry stage. The working relationships that investors The collaboration between ICEX-Invest in Spain and develop with national and subnational officials are an es- CCAAs’ IPAs on the investment promotion front is based sential part of providing the necessary verification and as- on the advantages derived from opening coordination and surance that the foreign firm will be able to establish and communication channels in a highly decentralized State. operate successfully in the location. The instruments described in this note were designed and implemented after different needs were identified and op- The various initiatives described in this note have been portunities arose from the operational experience and dai- very useful for Spain. The advantages of this model could ly work of different administrations. It therefore remains a be summarized as follows: work in progress, one in which Spanish administrations continually seek to increase the number of joint initiatives. • Improved service delivery to foreign companies that are This is particularly necessary in a rapidly evolving global interested in investing in Spain throughout the entire economic and FDI environment, which requires great flex- lifecycle of the project. ibility and innovation in the design and implementation of • Introduced a more solid and attractive value proposition public initiatives to foster foreign investments. for Spain as a destination for FDI, supported both by a Success in building a world-class national-subnational in- strong country-level offering and the diversity of the dif- vestment promotion model can be seen as a repeating ferent territories within the country. cycle of four discrete elements: • Strengthened promotion and dissemination of the ad- 1. The enabling legal, regulatory and institutional frame- vantages of the different CCAAs for foreign investors work that allows the cooperation and mandates key through a variety of channels. stakeholders; 14 >>> NATIONAL-SUBNATIONAL COORDINATION FOR INVESTMENT ATTRACTION: THE CASE OF SPAIN • Allowed the Spanish Administration to manage and for better service provision and increased chances of re- channel European aid in favor of the CCAAs. investment, a greater involvement of IPAs at both national and subnational levels in aftercare activities is key. It helps • Generated investment climate analysis tools and advo- establish long-term engagements with foreign investors to cacy recommendations for the CCAAs. foster reinvestment and linkages. Investors value national-subnational collaboration and A high-level, four-phase framework for the evolution of na- partnership. Strategic partners and networks—such as tional-subnational coordination models could be followed national and subnational IPAs—are more than just data based on the Spanish experience. These phases are: providers; they are ambassadors, facilitators and vital connectors. Best performing IPAs should always try to • Pre-reform situation: Often a fully or partially uncoor- build effective relationships and networks that will eventu- dinated model that lacks a legal and institutional frame- ally benefit international and domestic investors. Interna- work and has inefficient and ineffective administration. tional investors always highlight the importance of part- • Solid foundations for a model: The founding stage nerships at the subnational level. It is this location specific of a new or reformed national-subnational investment “know-how” that can ultimately drive investors decisions. promotion model can be the most critical. In this phase Countries can extract useful lessons from the Spanish the legal and regulatory framework that will enable the experience. First, the transparent exchange of informa- existence of the model is set out. Consensus between tion on new investment projects is very important, as this stakeholders is built and an integrated approach to will generate greater business and market intelligence, management and design, in which gradual progress is as well as larger synergies, which will help optimize the made in each of the key elements of running and over- value proposition to foreign investors. Second, the posi- seeing the model, begins to be implemented. tive impact of greater levels of coordination in the field of • Model with strong governance, mechanisms and advocacy. In contexts with highly decentralized admin- operational tools: Improvements in the legislative istrations some of the key elements of the investment framework continue in parallel with the setting of spe- climate affecting foreign investors are managed by the cialized committees and the design of mechanisms subnational entities or even municipalities. In order to and tools that will enable the model to be fully func- improve these processes it is important to increase the tional, effective and efficient. number of joint advocacy actions between national and regional administrations. • Mature and sophisticated model: Gradual progress has been made in each of the key elements of the mod- Finally, reinvestments are essential, particularly in light of el and it has reached a level of maturity and sophistica- COVID-19. According to UNCTAD, up to 60 percent of in- tion aligned with good practices. Reaching this stage vestment received is linked to a country’s existing invest- does not mean that improvements are scarce or impos- ment base. For this reason, considering the scenario that sible. On the contrary, improvements at this stage will has arisen with COVID-19, which envisions a significant be key to the innovative solutions and ICT tools that will contraction of new investments, the expansion of activi- ensure and increase the efficiency of the model, taking ties by foreign companies already present in the country into account challenges and opportunities ahead in the is key to achieve pre-pandemic FDI targets. In this sense, field of investment promotion. NATIONAL-SUBNATIONAL COORDINATION FOR INVESTMENT ATTRACTION: THE CASE OF SPAIN <<< 15 >>> References Bhasker, V. V. (2013). Foreign Direct Investment (FDI) in Indian Automobile Industry: Impact on Employment Generation. Research Journal of Management Sciences. Vol. 2(2), 14-22. ISSN 2319-1171 Dunning, J. H. 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