Bilateral trade between Spain and India has been growing steadily over the last few years. However, it is yet to reach its potential. In an exclusive interaction with The Dollar Business, H.E. Jose Ramon Baranano Fernandez, Ambassador of Spain to India, talks about the ways to further consolidate the strong bilateral relationship and maximise opportunities for investors from both countries.
Interview by Anishaa Kumar | March 2018 Issue | The Dollar Business
TDB: How would you describe the ever-evolving India-Spain trade ties?
H.E. Jose Ramon Baranano Fernandez (JRBF): Over the last decade or so, economic and commercial ties between India and Spain have been on an upswing. Trade and investment flows have seen a significant increase in this period. Trade flows have shown an upward trend since 2009 and bilateral trade has increased by 33% since CY2013. While this is good news, bilateral trade is still quite low between our two countries considering the size of the Indian and Spanish economies.
The perception of Spain in India, in terms of its economic and technical ability, has too improved considerably. Indian companies today acknowledge Spanish expertise in the areas of infrastructure development and renewable energy. And not to say, increased bilateral interaction will only to lead to greater synergies amongst companies from both the countries.
Our growth perspectives are also enhancing our business attractiveness. Evaluations for both Spain and India by World Bank and International Monetary Fund have been positive. Both countries are expected to be growth markets for each other in terms of trade and investments. Considering these facts and the recent economic forecasts made by various experts, we look at the future with optimism and hope to continuously improve the terms of our social, economic and commercial bilateral relationship with India.
TDB: How much interest is there surrounding India in Spain? What are the major challenges that Spanish businesses face while investing in India?
JRBF: Spain is the 12th largest investor in India, having invested $2.29 billion between April 2000 and September 2016. Most Spanish investments are focussed in sectors like infrastructure, renewable energy, automotive components, water desalination and retail – areas where Spanish companies have great expertise and vast experience.
In fact, more than 180 Spanish companies are present in India today. The growing interest of Spanish companies is reflected in these numbers, which is thrice of what it was in 2008.
One of the main challenges that Spanish companies face while investing in India is investment protection, given that the Bilateral Investment Treaty (BIT) between India and Spain has been terminated. We consider having a clear and stable investment framework a key aspect towards fostering bilateral investment flows. Hence, for India, it is of the utmost importance to re-launch negotiations with the EU regarding investment protection.
TDB: What opportunities do you see for Spanish companies in India?
JRBF: I think there is a real match between the experience and technologies that India is demanding right now and Spain’s areas of expertise. Spanish companies have experience in many sectors that could contribute to the Indian government’s initiatives. Spain can provide integral know-how on aspects such as design, urbanism, transportation, sanitation, traffic, electricity, etc., needed to build India’s new ‘Smart Cities’. Spain is also a world leader in water treatment, and the top producer of desalinated water in Europe and Latin America. Spanish companies could help redesign old plants and set up new water treatment plants in India.
‘Make in India’ is another initiative where Spanish infrastructure companies see opportunities. The modernisation of Indian airports, improvement of port infrastructure and navigability of big rivers are just some of the projects – which the Indian government is working on – where Spain can support India as it has vast experience in improving these kinds of infrastructure.
Renewable energy is another sector in which Spain stands out. Spain has a huge wind power capability, built over many years, and is one of the world leaders in wind power generation. In solar power generation, Spain is a pioneer and has developed a stable and cost-competitive industry. We believe the knowledge and expertise of Spanish companies in this sector can help India achieve its goal of generating 100 GW of solar energy, 60 GW of wind energy and 10 GW of biomass energy by 2022.
TDB: How can India and Spain further strengthen their commercial ties?
JRBF: Economic and commercial ties between India and Spain can be further fostered by a free trade agreement (FTA) between EU and India. Both parties have recently expressed their interest and commitment to re-launch negotiations of an ambitious and comprehensive FTA. Spain hopes that EU and India reach a fair agreement at the earliest possible moment.
Apart from trade, our relationship also has room to grow when it comes to investments. Our investment in India is just 0.13% of our total outward foreign direct investments (FDI), and Indian investment in Spain represents only 0.20% of our total inward FDI. To promote investment, competitiveness and economic growth, Spain has developed a comprehensive investment support system, giving special emphasis to employment generation, R&D and technological innovation.
TDB: What opportunities are present for Indian investors in Spain?
JRBF: Spain is a stable, mature and democratic economy that has shown consistent strong growth, year after year. As per IMF, Spain’s real GDP is expected to grow at 3.1% in 2017 and 2.5% in 2018, clocking highest growth rate amongst advanced economies.
In fact, when it comes to economic growth, Spain is growing twice as fast as the Euro area. It is also a remarkable fact that the growth rate of Spanish exports exceeds the exports growth rate of many eurozone countries.
A presence in Spain offers companies a new world of business possibilities and enormous market access. They gain access to a domestic market of over 46 million consumers, holding a GDP per capita (PPP) above the EU average. Spain also grants free access to the world’s largest market, the European Union, with more than 500 million consumers. Moreover, Spain is also the best country to be in if you want to do business with Latin America and North Africa, due to its several bilateral pacts and agreement on tax laws.
As Spain is an EU member, investors may also be able to benefit from European investment support programmes. Indian companies interested in investing in Spain can contact our Economic and Commercial Offices in India.
Further, some sectors are of special interest to Spanish companies – sectors such as automotive, machine-tool sector, biotechnology, finance, defence, infrastructure, construction machinery, environment, agricultural technology, healthcare, pharmaceutical, information and communication technology (ICT) and tourism. Hence, there are many great opportunities for companies operating in these sectors.
TDB: How is Brexit going to impact Indo-Spanish ties?
JRBF: Spain ranks seventh within the EU member states when it comes to bilateral trade volume with India. It is unlikely that Brexit will affect commercial relations between India and Spain. On the contrary, Indian investment in Spain may grow, as some companies presently located in UK will find greater benefits in Spain considering that it’s one of the most attractive investment destinations within the EU.