The Case of Spain

Although Spain held its position at number 23 in the Growth Index, it is still behind some of its main European rivals and also scores worse than supposedly less developed countries such as Singapore and Chile. The absence of any significant
change in comparison with last year is due to some strong macro-economic results and an improvement in its technology index, which together have countered the decline in the quality of its public institutions.

Given that Spain has remained in 23rd position, and bearing in mind that this is also the place it holds in the world rankings for GDP per capita, the result can be seen as positive. However, though it is true that Spain retains certain
important competitive advantages in respect to the macroeconomic environment and a highly positive position in this regard (16), the quality of the country’s public institutions (34) leaves much to be desired, having fallen three places from last year. Issues such as the independence of the judiciary, irregular payments and the protection of property rights have placed Spain among the lowest-placed European countries and behind countries like Ghana, Botswana and Morocco.

The Innovation Factor

As far as technology is concerned, Spain scored well (20), though this observation should be qualified. Firstly, the WEF report uses different formulae for measuring the technological competitiveness of the various economies, depending on whether or not they belong to the group of innovative countries. This group includes the 25 economies with the highest number of U.S. registered patents, and distinguishes between countries whose growth depends on their capacity for innovation and those that depend on the adoption of foreign technology, as is the case in Spain. In this second group, the formula applied gives much less weight to innovation and the use of Information and Communications Technologies (ICT), while including technology transfers, which basically consists of using investment and foreign licenses as a basis for acquiring new technology. It
is clear that, when assessed in this way, Spain obtains a high ranking, though the country must then be capable of moving up to the next level and becoming a technology creator.

Secondly, the areas in which Spain shows significant competitive disadvantages, which are basically those that relate to ICT, have a direct influence on the way the business community functions. As a result, the creation of new technologies and higher levels of investment in research and development are key to obtaining higher levels of productivity. Spain from reaching a par with those of its main European partners. As the attached tables show, Spain’s main competitive advantages can be found in its businesses, though this is also where its main disadvantages lie. The country enjoys significant

Weak Business Environment

Spain’s position in the Business Competitiveness Index is lower than the level achieved in respect of GDP per capita. This places the country among the group of “over-achievers,” those nations whose economic results are better than they should be
according to the competitiveness index. The special case of another over-achiever, Norway, offers a better understanding of this contradiction. This is a country with very high levels of per capita income but a rather lower competitiveness score.
Why should this be? Norway has abundant oil reserves, but its companies lack the dynamism and ability shown by those of Finland and Japan, where an absence of natural resources has forced them to “get their act together” and look to continuous
innovation as a way of attaining an increasingly improved standard of living.

More Disadvantages than Advantages

The Business Competitiveness Index reveals the weak points that prevent productivity levels in Spain from reaching a par with those of its main European partners. As the attached tables show, Spain’s main competitive advantages can be found in its businesses, though this is also where its main disadvantages lie. The country enjoys significant competitive advantages in areas such as interest rate differentials, mobile telephone penetration, the strength of the banking system and the quality of its business schools.

That being said, when it comes to doing business in Spain, regulation and employment practices, access to financing, the state promotion of Information and Communications Technologies (ICT) and bureaucracy represent real obstacles for business. It is imperative that governments create a business environment that operates in optimum conditions of competition and efficiency. This allows companies to take advantage of their full production potential. For their part, the companies themselves display worrying weaknesses, such as insufficient sophistication in the areas of operations and strategy, particularly in respect of R&D. To counteract this, businesses must place greater emphasis on investment.