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Why is the Valencian Region an attractive investment destination?

The Valencian Region has long been one of the main destinations in Spain for foreign investment. What are the main factors that international investors find appealing in the region?

That's right. The Valencian Region has been one of the main destinations in Spain for foreign investment, both in terms of investment flows and in terms of local employment generated, greenfield investments and number of subsidiaries. Today, there are more than 850 subsidiaries of foreign companies in our region, which account for 5% of employment, and 13% of turnover in the Valencian Region.

Not only that, but during the current period marked by the pandemic, we have witnessed a significant increase in interest in our region. The Valencian Investment Desk, which receives and manages applications and enquiries for foreign investment projects, has already processed 77 investment project applications this year. This already exceeds the total figures for 2020 and represents an increase of more than 11% compared to the pre-pandemic year.

The Valencian Region is a highly competitive, entrepreneurial and innovative region that compares favourably to other Spanish and European regions. It is the third largest economy in Spain with 10% of GDP and population and has an economic influence similar to that of countries such as Hungary and Israel.

Our economy is clearly geared to international markets with a higher ranking on the external openness index than the Spanish and WTO average. Our region scores highly on economic, geostrategic, infrastructure and quality-of-life factors, and these have played a major role in attracting foreign investment to the Valencian Region over the years. In fact, the latest figures for the first half of 2021 put investment at €397 million, a figure which exceeds the investments of a challenging year such as 2020 and places the Valencian Region as the third region in terms of investment value.

Its privileged geostrategic location provides rapid access to both the Spanish and European markets and makes it a true logistics hub in Southern Europe, operating as a gateway between North Africa and Europe and a key link to Latin America, with which we have strong historical and cultural ties. On top of this, the Valencian Region has excellent transport links, and its government is firmly behind the development of foreign investment projects.

Do you think these factors are enough today to consolidate and expand the footprint of international investors in the region?

Competition is fierce and global. The Valencian Region has considerable strategic resources to attract and consolidate investment projects. We must take advantage of this potential and improve our strategy for attracting investment. We need to continue to work on providing more incentives and advantages for different industries to boost the number of projects that finally set up business here.

Companies have more and more information at their disposal. They are becoming more and more demanding, as is only natural, and as a region, we need to rise to the challenge.

Post-pandemic prospects

What are the prospects for a region like Valencia in the current context marked by the pandemic?

In 2020, the global context was dominated by the coronavirus pandemic which, in terms of foreign direct investment, brought major setbacks in investment inflows across the board in most advanced economies. Although some existing investment projects ground to a halt, and despite a context of regulatory restrictions on investment and the need for increased controls and prior authorisations from Europe, investment performance in Spain in 2020 was stable and the reactivation we have seen in the first half of 2021 makes for positive reading.

How can the Valencian Region take advantage of major shifts in trade and investment in the post-COVID world?

The COVID-19 pandemic initially caused China to shut down its manufacturing apparatus. This triggered a demand shock in the West, which subsequently generated a supply shock. The paralysis suffered by economic activity has disrupted value chains globally.

In this complex scenario, governments around the world have implemented comprehensive measures to combat the negative economic effects of the crisis and have introduced FDI review mechanisms to protect critical industries from possible threats of foreign takeovers.

At the same time, multinationals are facing a challenging situation that will force them to review their future operations to some extent, taking into account the possible risks involved versus profitability forecasts, as well as reconsidering their supply chains in the medium and long term. The uncertainty created by the disruption of supply from regular providers may lead to a shortening of distances in the global value chains which will end up being relocated. Sourcing and stock safety for both finished and intermediate goods can no longer be dependent on one country or one location within that country.

One of the opportunities offered by the current situation is the implementation of a joint strategy between government and multinationals to ascertain their needs in the value chains and draw up programmes to fill the current gaps. In other words, to coordinate actions with the multinationals themselves to attract suppliers or potential suppliers.

Activities and industries ripe for opportunity

Which industries and activities offer the most attractive opportunities for international investment in the region?

Until the beginning of the 2000s, foreign investment in the region was marked by one-off operations in industry but, in recent years, there has been a healthy diversification of investment, with a greater weight placed on services and talent as pull factors.

The ICT industry is emerging as one of the sectors that is most actively interested in the Valencian Region. These are mainly consultancy companies, but also industry-oriented technology companies that consider our region to be the ideal setting for setting up business. In many cases, the advantages or opportunities depend on the type of project. Companies in the automotive, agri-food and logistics industries are also interested in our region.

However, we have a highly diversified business fabric that can accommodate all types of projects and industries. This is backed by a robust supplier network that can provide services to any type of company.

Is the region ready to take up these opportunities? What challenges need to be addressed for the Valencian Region to attract more and more investment?

There is always work to be done to ensure specific project needs and requirements are met, but the Valencian Region is ready. We were actually pioneers in publishing a specific law to reduce the time taken to complete the administrative procedures required to get an investment project up and running (Law to accelerate investment in priority projects), but even so, certain government departments need to be better staffed in order to speed up the process. A lack of funding obviously has a major impact on this.

This requires greater coordination with both the public and private sectors and the availability of all the instruments required to facilitate and speed up the Valencian Government's response.

IVACE’s objectives and instruments

What objectives and new instruments is IVACE developing to attract sustainable foreign investment that generates local wealth and helps to consolidate the position of foreign companies already operating in the region?

IVACE International has over 25 years’ experience in supporting the internationalisation of the Valencian Region's business fabric and has specific resources for attracting and retaining foreign investment, such as the Valencian Investment Desk.

This department provides the necessary information to facilitate decision-making for potential investors. In addition, it accompanies them in all phases of their project, providing tailored assistance from inception to final implementation, and helps them to arrange general and technical meetings. It also organises the best business location for each initiative.

In addition, it runs a loyalty programme for foreign companies based in the Valencian Region which aims to provide an in-depth analysis of their current needs to encourage reinvestment.

Within the framework of the Law to accelerate investment in priority projects (LAIP), the Investment Acceleration Desk was set up with the Valencian Investment Desk team to provide assistance to priority investment or reinvestment initiatives and to give these projects urgent and preferential consideration.

What kind of partnerships are envisaged to pool efforts?  

On the one hand, we have set up a Regional Coordination Plan to attract investment and reinvestment projects in conjunction with local authorities and all the agents that participate in implementation. The aim is to bring together all the parties involved in dealing with an investment project so that they can add value to the proposal.

Secondly, we have launched a programme to attract intra-group investment and reinvestment projects in order to take advantage of the potential value of multinational companies already operating in our region.

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