Analysis of Productivity & Industrial Sector in Spanish Economy: Specialization & Foreign , Apuntes de Administración de Empresas

¡Descarga Analysis of Productivity & Industrial Sector in Spanish Economy: Specialization & Foreign y más Apuntes en PDF de Administración de Empresas solo en Docsity! THE INDUSTRIAL SECTOR OF SPAIN IN SEARCH OF A NEW POLICY José Molero and Inés Granda. Universidad Complutense de Madrid 1. - Introduction. The intensity of the current crisis has had a remarkable number of repercussions in all sectors of the economies and particularly in those of the European Periphery.. Of course, Industry has not escaped that impact and has experienced important consequences as well. To make a general assessment of its situation a twofold perspective has to be considered: on the one hand, you have to analyse all available quantitative information from the most important statistical sources. On the other, you have to take into account a number of features of the industrial sector which give industry a particular importance for the economy as a whole. We shall refer to productivity, technological innovation, the multiplier effect and employment. As far as productivity is concerned, the noticeable fact is that industrial sectors have a higher average productivity than the rest of the productive activities. This is particularly important for the Spanish economy because it has performed badly in this area, with grave consequences for international competitiveness. Closely linked to that, we have to consider the capacity of industry with regard to technological innovation. Beyond the fact that innovation in services is having a remarkable development – in particular in production services- we can still assert that industry has a by no means negligible role in the generation, diffusion and implementation of innovations. Furthermore, a noticeable part of the innovation of service companies is a consequence of the externalisation of those activities by industrial firms. 1 Thirdly, we have to underline the fact that industrial sectors have powerful linkages with many other productive activities. This makes industry an essential engine for the economy insofar as its dynamism is transmitted to others more than in the case of other economic sectors. This leads us to the last argument. Industry has a particular importance for new job creation, either directly or indirectly. Moreover, those jobs usually are of a better quality and stability because industry demands a more skilled labour force. 2. – Industry within the overall economic system. A first contextual data we have to evaluate is the weight industry has in the Spanish economy. As for many other developed countries, the general trend in recent decades has been a reduction in that weight. As figure1shows, until very recently the tendency was for industry gradually to lose presence in the productive system. However, looking at current VA data, industry has shown a positive evolution from 118,294 million Euros in 2000 to 168,601 in 2008, with positive rates of growth in all years. 2009 was a dramatic year because industrial VA decreased 11.5% to 149,137 million Euro. In the last years there has been a partial recovery to 165,051 million in 2011. As those values are in current Euros, the meaning is that in constant currency today VA production is clearly below that of 2008. (Figure 1 around here) If we focus on the share of industrial VA in the total, the evolution is characterised by a gradual decrease between 2000 and 2009 (from 18.78% to 14. 23%). To a great extent it was due to the faster growth of the building and service sectors. The situation changed after 2009; the particular crisis in building and related activities (including finance) and the relative resistance of industry has led to a recovery of industry VA up to 15.52% in 2011. In other words, industry is following a more solid path in the hardest period of the international crisis. The following sections will help us to assess if it opens a window to the hope. 2 of sectors. The other side of the coin is that both MH-T and H-T categories have a negative specialisation. This dualism goes back a long way (Buesa, Molero, 1996) and has persisted in the period of crisis. (Table 2 and figure 4 around here) This persistence notwithstanding, there have been some interesting changes. The most noticeable one is the growing specialisation in L-T sectors: from 1.05 to 1.18. This coincides closely with a simultaneous decreasing specialisation in ML-T sectors. In other words, we have witnessed a sort of substitution between those categories of sectors which may have weakened the overall international position of Spanish Industry. In opposition to that is that in MH-T and H-T categories Spain shows an outstanding stability in low scores. It is particularly so in MH-T while H-T sectors have followed a path of two sub-periods: in the first one their SI declined, but they recovered the previous values in the second sub-period. Interestingly enough is the fact that the Spanish configuration is not an exception within the EU. Thus, analysing the four largest countries, we find that three of them – Italy, UK and France- show specialisation in L-T as well; France has SI values even higher than Spain. Only Germany has a substantially low specialisation in those sectors. Looking at the other extreme – H-T- only the UK has a positive (> 1) index and Germany is close to 1. However, Italy and France have low scores (– 0.75 and 0.82 respectively). In other words, the problem of a low presence of H-T sectors is a more widespread characteristic of many European economies and is a sensitive part of their capacity to compete with other better adjusted industrial economies, including some important emerging countries. (Table 3, around here) 5 4. - Internationalisation. A basic component of the present situation of Spanish Industry is revealed by the trend of its international performance. To tackle this issue we are going to address two main components: international trade and direct foreign investment. As far as International trade is concerned, table 4 shows the main figures of industrial exports and imports in the last years. In fact, two different periods can be noticed: before and after 2009. Before 2009, imports had a steady growth, due to the demand created by domestic industries and final consumption; between 2005 and 2008, industrial imports grew more than 20% in current prices. Similarly, exports grew more than 27%, due to a growing capacity of Spanish companies, including foreign subsidiaries, as is the case of the Vehicle Industry. The result was a smooth increase of the rate of cover from 72.75 % in 2005 to 76 % in 2008. Nevertheless, the deficit continued to be remarkable, because the 24% was more than 41,000 million in current Euros. (Table 4 around here) 2009 meant a turning point as can be derived from the following facts. Regarding imports, the steep fall in that year is the beginning of a new context characterised by the domestic depression and a weak demand for foreign industrial products. So, in spite of the irregular recovery in the following years, the level in 2012 is still 80% of that of 2008 at current prices. The case of exports is very different. Since 2009, a significant increase has taken place and the 142,974 Million Euros in 2012 is 36% over the exports of 2009. The combination of the weak domestic demand with a remarkable effort in reducing costs (mainly labour ones) has significantly improved the international competitiveness of a by no means insignificant part of Spanish industry. 6 The combination of both processes has led to a rapid reduction of the external deficit to the point that in 2012 there was a surplus of 4,195 Millions, which is a very singular fact in the recent history of Spanish industry. In other words, the rate of coverage passed from 76% in 2008 to 103.02 in 2012. The relevant question is to what extent this particular evolution will continue once the internal demand returns to its historical levels and the margin for competing through labour costs disappears. Although it is not exactly an answer to this question, an outstanding element for a better understanding of the structural background of the former figures has to do with the different levels of foreign trade. Following our argument of the scarce development of H-T sectors, table nº 5 gathers the information on foreign trade of these sectors, summarised in the rate of cover. (Table 5 around here) The first conclusion we can draw is the different situation of HT sectors with regard to that cover. Figure nº 5 includes the evolution of both rates and it is clear how in H-T the international competitiveness is significantly smaller. Thus, in spite of the growth of the last years, it is still below 50%. An in-depth analysis by individual sectors shows that the weakness is particularly relevant in Office Machines and Computer Equipment (19.9%), Electronic Equipment (28.9%), Scientific Instruments (33.8%) and Electrical Machinery and Equipment (47.3%). The opposite is clear for Mechanical Machinery and Equipment (228.9%), Chemical Products (120.8%) and Construction of Aeronautical and Space Equipment (123.3 %). (Figure 5 around here) In short, Spain stands out as one of the OECD countries in which HT industries have a clear negative contribution to the manufacturing trade balance. Figure 6 clearly supports that assertion. 7 technological content of our industry is reflected in FDI, both inward and outward. In other words, a large part of the activity is in the hands of L-T or ML-T sectors. The two most remarkable exceptions are Vehicles and Chemicals, both included in MH-T category. In all these cases, we can speak about a kind of intra-sectoral flow insofar as they receive and send FDI permanently. Nevertheless, most H-T sectors are not so active, perhaps as a consequence of their lesser development in Spain. 5. - Technological Innovation. In previous parts of this essay we have stressed how in the current competitive world, knowledge and technology have acquired a prominent role, particularly for developed countries. Historically the position of Spain with respect to this factor has been a deficient one (Molero, 2001). Since the 1980´s a number of significant policy measures had been put into practice with the aim of reducing such a significant lack. After more than 20 years of the approval of the Spanish Science and Technology Law (1986) and taking into account the importance of the economic development of Spain, the current balance can be established as follows. First of all is a non-negligible improvement in the process of technological innovation; just as a rough indicator R&D expenditures over GDP passed from less than 1 per cent at the end of the 1990´s to 1,35 in the last years. Although that improvement is more visible regarding the public sector (i.e scientific publications, public budgets devoted to R&D), it has also happened in the private entrepreneurial sector (i.e the increasing of the number of innovative firms or the increased funds devoted to innovation). 10 However a number of weaknesses still continue dominating the panorama of innovation in Spain. First of all, Spain has not yet caught up with the most developed, technologically advanced economies. This general fact is based on a number of disadvantages still dominating the innovation system: the reduced number of innovatory firms, the insufficient effort they make in devoting resources to innovation, the lesser collaborative activity they perform, or the low development of risk capital are only some of the most prominent factors (Molero, 2012; Laviña, Molero, 2012) What has happened in the last years of economic crisis? The most general and worrying aspect has to do with the slump in the positive expectations created after a quarter of a century. The starting point has to be the general position of the Spanish economy regarding innovation effort. To this end the strongest indicator may be the Innovation Scoreboard developed by the European Commission (EU Innovation Scoreboard, 2013. DG Enterprise and Industry) which gathers and standardises 25 indicators belonging to 8 dimensions and grouped in three main axes: enablers, firms` activity and outputs. Figure nº 8 shows the results for 2012 and classifies countries in four groups according to their scores with regard to the synthetic index: Innovation Leaders, Followers, Moderate innovators and Modest Innovators. The Spanish position, among Moderate Innovators, clearly shows the distance Spanish economy has to cover to reach the level of the most dynamic innovative European countries. Moreover, an in-depth analysis of the dimensions and indicators provided by figure 9, clearly shows the previously expressed indicators picture of imbalance between research and general political indicators, in which Spain performs better, and most firms and economic results related to indicators, which clearly show a backward situation of Spain. In other words, they relate significantly to the industrial structure we expounded in pervious sections of this paper. To a great extent the relative backwardness of the Spanish innovative position is a consequence of its lack of specialisation in H-T sectors, as well as to other structural dimensions such as the predominance of micro and small firms, the lack of large companies or the insufficient contribution of MNCS´ subsidiaries to the innovation dynamisms of the Spanish economy 11 (Molero, Garcia, 2008). From the point of view of the Innovation System other weaknesses also contribute to an understand of the general result; among others we can mention the scarce development of risk capital, the short term orientation of the bulk of the financial system, the still deficient relations between university, public laboratories and firms or the predominance of minor-adopted innovations among the general innovatory activity of firms (Molero, 2012). (Figures nº 8 and 9 around here) In recent years, the crisis has seriously affected the innovation panorama along two broad lines. On the one hand, there have been noticeable cuts in the State budget for R&D&I. In 2013, this budget is less than 6,000 million Euro in current prices, when in 2008 it was more than 9,000. Considering the rate of inflation, we arrive at the conclusion that financial resources in constant Euros have descended to the level of 2004. Moreover, in the same period of time there has been an increasing level of non-executed parts of the budget, so the reduction of resources placed at the disposal of the innovation system has been dramatic2. On the other, latest reports on the innovative activity of enterprises show they also have a reduced volume of R&D and Innovation resources (Laviña and Molero, 2012). The consequence is that in 2011 we have witnessed the first reduction in the R&D/GDP ratio since we have had statistics in Spain. 6. - Conclusions and policy recommendations. The review we have made of the most significant facts of the recent evolution of Spanish industry leads us to a balance sheet in which it is difficult to separate lights and shade. Of course in a general balance areas of shade are dominant, because the 12 2See: J. Molero and J. De NO: Informe sobre los Presupuestos Generales del Estado, 2013. COSCE, 2012. Last but not least, that new perspective needs a new social contract in which politicians, workers, entrepreneurs and scientists share a new vision of the future of international competitiveness and social welfare. 15 Table nº 1. Employment by Economic Sector (Thousands) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Primary sector 942.0 948.2 936.5 925.3 893.5 868.4 821.3 801.2 770.6 738.3 753.0 727.9 Industry 3,024,3 3,017.6 2,980.1 2,978.5 2,955.1 2,931.8 2,870.7 2,809.3 2,768.8 2,421.3 2,337.6 2,315.1 Construction 1,846.6 1,982.4 2,060.2 2,154.3 2,242.7 2,405.0 2,551.2 2,687.1 2,373.6 1,870.6 1,634.4 1,378.6 Services 9,856.6 10,248.9 10,599.9 10,946.8 11,399.1 11,891.4 12,482.9 12,985.8 13,334.5 13,014.3 12,859.8 12,864.6 Source: National Institute of Statistics (INE): National Accounting for Spain Table nº 2. Industrial Specialization Index by Technological Intensity Spain 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 HIGH TECH 0.65 0.68 0.59 0.56 0.55 0.55 0.55 0.57 0.61 0.61 0.61 MEDIUM-HIGH TECH 0.86 0.85 0.87 0.85 0.85 0.81 0.81 0.80 0.79 0.83 0.81 MEDIUM-LOW TECH 1.23 1.26 1.27 1.26 1.24 1.22 1.21 1.18 1.16 1.12 1.15 LOW TECH 1.05 1.03 1.04 1.06 1.08 1.12 1.14 1.17 1.19 1.16 1.18 Source: Own elaboration with Eurostat National Accounts data Table nº 3. Industrial Specialization Index by Tecnological Intensity, 2010 Country H-T MH-T ML-T L-T Spain 0.61 0.81 1.15 1.18 Italy 0.75 0.83 1.12 1.15 UK 1.59 0.88 0.88 1.05 Germany 0.96 1.43 0.90 0.65 France 0.82 0.82 1.28 1.21 Source: Own elaboration with Eurostat National Acoounts data Table nº 6: Foreign Direct Investment and Manufacturing Sectors (Thousand €) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Inward FDI 2,553,572 14,001,513 19,275,283 9,581,995 8,324,029 5,108,652 3,912,264 8,221,307 7,940,323 6,535,116 12,254,341 6,445,776 5,625,418 Outward FDI of Spanish manufacturing firms 7,991,718 7,906,184 6,514,236 5,046,799 3,979,701 7,967,094 6,243,729 13,619,832 5,460,538 1,527,991 1,510,539 2,644,832 1,183,436 FDI of Spain on foreign manufacturing sectors 7,322,303 11,571,424 21,442,132 18,371,854 12,418,532 7,934,044 7,814,203 20,578,353 11,749,080 4,195,621 4,440,389 5,475,598 2,904,541 Source: DATAINVEX. Ministry of Industry, Energy and Tourism (Spain). Source: Own elaboration with data from National Institute of Statistics (INE), National Accounting for Spain 21 Source: Own elaboration with Eurostat National Accounts data 22 Source: National Institute of Statistics (Spain) 25 Figure nº 6. 26 Source: DATAINVEX. Ministry of Industry, Energy and Tourism (Spain). 27