PARTICIPANTS:

Ramón Luis Valcárcel, president of Murcia

Courtney Fingar, editor, fDi

Benito Mercader, minister of industry and the environment, Murcia

Douglas Clark, director, Tenon Techlocate

Mario Armero, president, GE Iberia

Ramón Luis Valcárcel: Spain is one of the 10 destinations in the world that attracts the most capital, and Murcia is the third region in Spain in terms of foreign investment. Murcia has several advantages as an investment location, including a strategic position in the ‘Mediterranean Arch’ (one of the new and big spaces of activity created close to the EU). The region has a long history and a lot of experience in attracting investments thanks to its special conditions: an enviable climate that gives us the highest number of sun hours per year on the continent; good communications via land, sea and air (with the prospect of a second international airport within the next year); a wonderful availability of industrial land; a qualified labour force with no labour conflicts; and first-class social services’ provision.

The number and importance of the companies that have decided to settle in our region confirm that we have become quite expert at marketing and supporting investment deals.

Murcia’s economic structure is surprisingly diversified, which has led to a sustained growth in headline economic figures: in 2005 Murcia’s economy grew by 3.8%. Murcia is, first of all, an open economy. That’s why investment promotion and attraction play such a relevant role in our economic activities.

Courtney Fingar:

Before we delve any deeper into Murcia as a case study and as a potential investment location, we should speak in a broader sense about manufacturing strategies of global companies and how they have been evolving. Much has been said and written in recent years about the shift of manufacturing operations to lower-cost destinations, such as those in central and eastern Europe and the Far East. And, although a great deal of this has been overblown, it nonetheless begs the question of where this leaves western Europe, which cannot necessarily compete on cost with these types of locations.

We need to examine what a region like Murcia can offer, given the new global dynamics, and what role it can play in the global manufacturing industry. General Electric, for example, opted to not only put manufacturing operations in southern Europe but has continued to expand them, so we can infer that the company is very happy with this arrangement and has hit upon a strategy that works for it.

As a consultant who advises governments on their inward investment strategies and companies on where to locate, what are you seeing, Mr Clark?

Douglas Clark:

First of all manufacturing is still very important for western Europe: there are about two and a half million manufacturing jobs in the region.

As you said, there are a lot of manufacturing operations moving to lower-cost locations. The companies that we are working with are primarily moving for cost reasons – cost reduction is still very important to manufacturing businesses, especially labour costs.

But there are other elements that are driving manufacturing businesses to invest in new locations. They are also trying to create new markets; market entry and market growth are important factors for them. And they are trying to create productivity. If they are going to greenfield locations or outsourcing manufacturing, they are able to look at processes and improve productivity through that. Generally, they want to increase the top line: they want to sell more, they want to make more, so they have got to think about going into these new locations. So it is a very competitive landscape for manufacturing.

CF: What can Murcia do to respond to these trends in global manufacturing and to set the stage for sustainable economic growth in the region?

Benito Mercader: Murcia has continued to grow during the past several years, showing a growth rate of 3.8% for 2005 (one percentage point more than the national average). This development has been carried out with scrupulous respect for the environment and keeping the sustainable growth and the ecology as a priority – above all, renewable energy and reuse of water. We think we may be able to fulfil the EU’s requisite that 12% of the energy consumed yearly be renewable by 2010.

Murcia has always demonstrated commitment with companies and citizens, and some infrastructures are important so that they can keep working and creating wealth. The international airport of Murcia plays a fundamental role in this sense, as well the TAV (high-speed train) that will considerably shorten the connections with Valencia and Madrid, and the motorways and dual carriageways.

All of these targets will be met with respect for the environment and sustainable growth.

DC: In terms of Murcia differentiating itself, what I think is the way forward is the word ‘growth’. Manufacturers want to go into growth locations. Murcia is a growth location and one that has a future – there are going to be more people and more wealth. And we should not just look at Spain; it is the entire Magreb region as well. If you look at the bigger region it’s a market of 130 million-140 million people. That’s very interesting and allows a place like Murcia to compete with bigger locations such as central Europe and even China.

I think the market opportunity and the growth that is happening in the area is the best story.

Talking up Murcia: (from left) Ramón Luis Valcárcel, Benito Mercader and Mario Armero

CF: There are obviously opportunities in infrastructure, tourism and environmental technologies – and these seem promising – but let us narrow our focus to plastics and packaging, as we have an excellent case study here in the form of GE Plastics. Mr Armero, can you explain GE’s strategy in Murcia?

Mario Armero: First let me say, just to be a little provocative, that sometimes I suspect that eastern Europe gets the front pages in the newspapers and western Europe still gets the investments.

GE has been present in Spain for over 50 years and our footprint covers 40 business units from healthcare to aircraft engines to the NBC Universal media company. We have 12 industrial plants throughout Spain, over 3500 employees, over E1.7bn of sales, and a huge amount of exports from Spain, mainly from Cartagena, in Murcia. A year from now our exports from Murcia will reach E700m-worth. What is more important is that we have invested more than E3bn in Spain in the past decade. Some of the investments were focused on gaining productivity and production capability, like in Cartagena; other investments were focused on having access to the markets.

We have invested in Spain because we found an interesting profile. First, there is continued economic growth, outperforming the rest of the EU in the past 10 years. Second, there has been a spectacular demographic increase, mainly through immigration, that has opened new business opportunities for GE and for many companies. Third, Spain has a continuing need for new infrastructures – there is a huge number of projects in energy, healthcare, airports and water plants, and we are players in all of these fields. In addition, there is a very interesting city-growth economy – our companies focus on the megapolis, on the big-city growth.

Also, in Spain we can get access to talent: good, professional, hardworking people who, contrary to legend, know how to work as a team and who are eager to learn English (unlike in some countries in Europe).

Finally, we think that, overall, Spain has a friendly business and legal environment.

We have been able to capitalise on these positive features and in the past three years my company has doubled its sales in Spain.

In Murcia, we have made the biggest greenfield investment of GE worldwide in the past 15 years. And we are building our most advanced technological project there: a high-performance plastics manufacturing plant. It is the first time we will bring this technology out of the US. We worked very hard in the past three years competing to get this plant and there were lots of options in western Europe, in the US and in Asia – and Cartagena won this opportunity.