With €300 billion in foreign direct investment over the past decade, Spain strengthens its position as the Mediterranean’s economic engine

TEHA Group (The European House-Ambrosetti) has presented the study "Investing in the Mediterranean: Dynamics in Spain and Italy for Foreign Direct Investment Attraction" at IE Tower, IE University's vertical campus in Madrid. This research, conducted in collaboration with Amazon and under the academic direction of IE University, analyzes the disparities in foreign direct investment (FDI) flows between Spain and Italy. Between 2015 and 2024, Spain attracted €304 billion in FDI, compared to €191 billion recorded by Italy. Additionally, the study proposes policy measures to stimulate investment in both countries.

The report emphasizes that Spain has bolstered its appeal for foreign investment in the Mediterranean region. It proposes five key reforms to solidify its position:

1. Administrative digitalization: Continuing the digital transformation of public services, with a focus on streamlining business procedures through unified digital platforms and standardized protocols across regions, is crucial for attracting foreign direct investment.

2. Harmonization of the administrative framework: To enhance system competitiveness, it is essential to establish robust coordination mechanisms between national and regional authorities to reduce administrative complexity while preserving the advantages of local governance.

3. Regulatory streamlining: A critical factor in attracting investments is the predictability of the regulatory and legal system. A clear regulatory framework will facilitate SME growth and foster new opportunities for innovation and exports.

4. Enhancement of the innovation ecosystem: Strengthening linkages between research institutions and industry through targeted R&D collaboration incentives. In this domain, policymakers should prioritize the development of innovation hubs, particularly in emerging sectors such as artificial intelligence, clean technologies, and advanced manufacturing.

5. Talent acquisition: Creating favorable conditions for international talent through streamlined visa procedures, support programs for international business communities, and initiatives to enhance the digital competencies of the workforce.

"This research also underscores the necessity for collaboration between Spain and Italy," concludes Enrico Letta, Dean of IE School of Politics, Economics and Global Affairs at IE University in Madrid and Advisor to the research. "Indeed, there is significant complementarity, and each country can readily benefit from increased cooperation."

The study provides an in-depth analysis highlighting the impact of foreign investment in Spain.

The research benefits from the contributions of a distinguished Scientific Committee chaired by Enrico Letta and comprising Carlo Altomonte (Vice Dean of SDA Bocconi), Patricia Gabaldón (Professor of Economics and Academic Director of the Bachelor in Economics at IE University), and Jordi Sevilla (Economist, former Minister of Public Administration of Spain, and former President of Red Eléctrica de España (REE)).

The comparative analysis of both countries reveals that the 856 greenfield foreign direct investment projects implemented in Spain up to 2024 generated 72,416 new jobs. Meanwhile, the 303 projects executed in Italy created 40,006 jobs. This represents a significant disparity, considering the similar economic foundations and cultural proximity of both countries.

"As one of the primary investors in Spain, Amazon has been able to directly observe the country's strengths and challenges. Since our entry into Spain, we have invested over €20 billion in infrastructure and operations. We operate approximately 40 logistics centers distributed throughout the territory and two innovation centers in Madrid and Barcelona, which collectively employ more than 1,000 individuals dedicated to technological development," stated Ruth Díaz, General Manager of Amazon in Spain. "The recommendations presented in this report to strengthen the Spanish economy are clear: digitalization is a catalyst for attracting foreign investments, but equally important is the need for a more stable, efficient, and streamlined regulatory system. At Amazon, we firmly believe that through collaboration and a shared vision, Spain can position itself among the world's premier investment destinations."

Key differentiators between the two countries

The report systematically compares the factors influencing foreign investment attraction in Spain and Italy. Despite their cultural and economic similarities, the two countries exhibit significant contrasts. These differences help explain why Spain has succeeded in attracting a greater number of investment projects and more employment opportunities over the past decade and provide the foundation for the report's recommendations to further enhance its competitiveness:

• Regulatory framework: Spanish Autonomous Communities are distinguished by the quality of their governance. However, the Italian system ensures greater uniformity and less fragmentation between different levels of government. Experts confirm that bureaucracy is more complex in Spain: Spanish SMEs dedicate an average of 27.7 hours per month to complying with bureaucratic procedures, compared to 26.1 hours in Italy.

• Productivity: Spain's labor productivity has increased by 3.2%, while Italy has registered a 2.6% decrease, highlighting that the positive outcomes of the Italian labor market have not fully translated into economic growth.

• Education: Both countries invest less than 5% of GDP in education and remain below the EU average in tertiary spending per capita, compromising quality and competitiveness. In this regard, Italy would require an additional €13.6 billion per year compared to Spain's €2.9 billion to reach the European standard of investment in education.

• Digital infrastructure and costs: Spain offers superior digital public services and cross-border digital services according to the European Quality of Government Index. Spanish companies also benefit from lower electricity costs (€166.6/MWh compared to €252.9/MWh in Italy).

• Migration policy: In terms of migration, the study reveals that Spain has leveraged this phenomenon as a driver of competitiveness and demographic sustainability, with 18.6% of its population foreign-born compared to 12.2% in Italy. The research underscores that without strengthening migration policies, both Spain and Italy will face a significant contraction of their workforce in the coming decades, making migration an essential tool to counteract population aging and sustain growth.

• Energy sector: Spain benefits from a more diversified energy mix: only 22.5% of electricity is generated from natural gas, compared to 45% in Italy. This is attributed to a combination of nuclear and renewable sources,hich contributes to maintaining lower costs for businesses (€166.6/MWh compared to €252.9/MWh in Italy). Tax incentives and streamlined permit granting procedures have played a pivotal role, enabling Spain to surpass Italy in solar energy production as well.

"This report confirms that attracting international investments requires a systemic and comprehensive approach," stated Valerio de Molli, CEO of TEHA. "The data clearly demonstrates that digitizing public administration and harmonizing regulations across different regions are not abstract reforms, but have a direct impact on a country's capacity to attract and retain international capital. Countries that offer investors certainty in terms of timelines, transparent procedures, and efficient digital interfaces consistently demonstrate superior FDI performance."