Doing Business In Spain And Preparing Hr For The Challenge A Business Study

DOING BUSINESS IN SPAIN ….

…. AND PROSPECT FOR SEL

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Doing Business In Spain - NFM

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OUTLINE OF PRESENTATIONA. General Country Info

B. Business Environment

1. Economy

2. Market

3. Invest ment Climate/ Business Incentive

4. Ease of Starting Business

5. Structural Support to Business

6. Political, Cultural, and Social Climate

7. Manpower Resources

C. Prospects for SEL

1. Electricity Generation Trend

2. Present SEL Presence in Spain

3. Setting-up Business


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GENERAL COUNTRY INFOArea of 504,782 square kilometers in the southwest of Europe, and is the second largest country in the EU

Spain covers most of the Iberian Peninsula, which it shares with Portugal, and also includes the Balearic Islands in the Mediterranean Sea, the Canary Islands in the Atlantic Ocean, the North African cities of Ceuta and Melilla and some surrounding rocky islands.

A typical Mediterranean climate.

The population in 2010 was 47 million people. Relatively young: 15.6% is under 16 years old, 67.5% is between 16 and 64 years old, and only 16.9% is 65 and over.

Spanish is the official language of the country

Became a full member of the European Economic Community in 1986. Therefore, EU legislation is fully applicable in Spain.


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BUSINESS ENVIRONMENT A. Economy - Attractiveness > 12th largest economy in the world and 5th in the EU.

> Ranks 7th in direct FDI received.

> Number ten investor in the world in terms of stock and number two investor in Latin America.

> 7th-ranked exporter of business services.

> Spain offers investment opportunities in sectors and activities with significant added value.

> In the past five years, one out of every three incoming projects has been in sectors with high

technological value and a significant level of R&D&I. These include ICT, the environment

and water treatment, biotechnology and health sciences, aeronautics and aerospace, and renewable energies.


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BUSINESS ENVIRONMENTA. Economy – GDP Composition

In 2010, the service sector accounts for 70.06% of Gross Domestic Product (GDP), industry 15.19%, construction 10.36% and agriculture 4.39%. The construction sector is currently suffering because of the global economic crisis.

STRUCTURE OF GDP (% of total, current prices)

2008 2009 2010

Agriculture 4.0 4.2 4.4

Industry 15.3 14.4 14.3

Construction 11.0 9.7 8.5

Services 69.7 71.7 72.8

Source: National Statistic Institute.Labor Force Survey, 2010


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BUSINESS ENVIRONMENTA. Economy – Economic Growth

Economic growth

2001 2002 2003 2004 2005 2006 2007 2008

Real GDP growth

Annual growth %

3.6 2.7 3.1 3.3 3.6 4.0 3.6 0.9

Net saving rate in household disposable income

% 5.6 5.6 6.0 4.9 4.7 4.2 3.6 6.1

Gross fixed capital formation

% of GDP 26.0 26.3 27.2 28.0 29.4 30.6 30.7 28.8

Economic growth is projected to strengthen gradually, reaching 1% in 2011 and 1½ per cent in 2012,as the damping impact of downsizing in residential construction diminishes and the international environment improves.

Source: Country statistical profiles: Key tables from OECD - ISSN 2075-2288 - © OECD 2010


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BUSINESS ENVIRONMENTA. Economy – Prices and Interest

RatesPrices and interest rates

2001 2002 2003 2004 2005 2006 2007 2008

Inflation rate: all items

Annual growth %

3.6 3.1 3.0 3.0 3.4 3.5 2.8 4.1

Inflation rate: all items non food non energy

Annual growth %

3.5 2.8 2.9 2.4 2.5 2.8 2.5 2.3

Inflation rate: food

Annual growth %

5.9 5.0 4.1 3.9 3.2 4.1 3.7 5.9

Inflation rate: energy

Annual growth %

-1.0 -0.8 1.4 4.8 9.6 8.0 1.7 11.9

Producer Price Indices (PPI): manufacturing

Annual growth %

1.7 0.6 1.4 3.7 4.7 5.0 3.4 6.0

Long-term interest rates

% 5.12 4.96 4.13 4.10 3.39 3.78 4.31 4.36

•For the year 2010, the official interest rate has been stated as 4%. Consumer price inflation will tend to fall, once the effect of rising energy and food prices and the increase in the VAT rates drop out.



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BUSINESS ENVIRONMENTA. Economy – Employment

Employment 2001 2002 2003 2,004 2005 2006 2007 2008

Employment rate aged 15-24 % 37.1 36.6 36.8 38.4 41.9 43.3 42.9 39.5



Part-time employment % 7.8 7.7 8.0 8.5 11.3 11.1 10.9 11.1

Self-employment rate % 19.8 19.0 18.3 18.1 18.2 17.9 17.7 17.7

Unemployment

Unemployment rate: total civilian labour force

% 10.4 11.1 11.1 10.6 9.2 8.5 8.3 11.4

Long-term unemployment: total unemployed

% 44.0 40.2 39.8 37.7 32.6 29.5 27.6 23.8

Unemployment is a persistent problem of the economy. However, since 1994 unemployment was dropping on a yearly basis of up to 8.3% in 2007, the lowest rate since 1979. However the current economic turmoil has increased unemployment to a 18.1% in 2009 and 20.2% in 2010.



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BUSINESS ENVIRONMENTA. Economy – Employable Population

Population 2001 2002 2003 2004 2005 2006 2007 2008

Total population

'000 persons

40 721 41 314 42 005 42 692 43 398 44 068 44 874 | 44 311

Population growth rates

% 1.1 1.5 1.7 1.6 1.7 1.5 1.8 ..

Total fertility rates

Children 1.2 1.3 1.3 1.3 1.3 1.4 1.4 1.5

Youth population aged less than 15

% of population

14.6 14.5 14.5 14.5 14.5 14.5 14.6 14.7

Elderly population aged 65 and over

% of population

16.9 16.9 16.9 16.8 16.7 16.7 16.6 17.0

Employable local population (above age 16 up to 65 accounts for 68% of total population



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Unemployment Rate - % of Labour Force% of labour force

2003 2004 2005 2006 2007 2008 2009 2010Australia 6.0 5.5 5.1 4.9 4.5 4.3 5.7 5.3Canada 7.7 7.3 6.8 6.4 6.1 6.2 8.4 8.1Chile 8.7 9.1 8.3 7.9 7.4 8.0 10.0 8.4Denmark 5.5 5.6 4.9 4.0 3.8 3.4 6.1 7.6France 8.5 8.9 8.9 8.8 8.0 7.4 9.1 9.3Germany 9.4 10.4 11.3 10.4 8.7 7.6 7.8 7.2Greece 9.9 10.7 10.0 9.0 8.4 7.8 9.6 12.7Iceland 3.4 3.1 2.7 3.0 2.3 3.0 7.4 7.7Ireland 4.7 4.6 4.8 4.7 4.7 5.8 12.2 13.9Italy 8.7 8.1 7.8 6.9 6.2 6.8 7.9 8.5Japan 5.4 4.9 4.6 4.3 4.1 4.2 5.3 5.3Korea 3.7 3.8 3.9 3.6 3.4 3.3 3.8 3.8Mexico 3.1 3.8 3.6 3.3 3.5 3.6 5.4 5.4Netherlands 4.2 5.1 5.3 4.3 3.6 3.0 3.7 4.5

New Zealand 4.8 4.1 3.9 3.9 3.8 4.3 6.3 6.7

Portugal 6.6 7.0 8.1 8.1 8.5 8.1 10.0 11.4

Spain 11.4 11.0 9.2 8.6 8.3 11.4 18.1 20.2Sweden 5.8 6.6 7.8 7.1 6.2 6.1 8.5 8.5

United Kingdom 4.9 4.7 4.7 5.4 5.3 5.4 7.8 7.9

United States 6.1 5.6 5.1 4.7 4.7 5.8 9.4 9.8

Employment and labour markets: Key tables from OECD - ISSN 2075-2342 - © OECD 2011

BUSINESS ENVIRONMENTA. Economy – Comparative Unemployment of

selected countries


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BUSINESS ENVIRONMENTA. Economy – Tax on Business

> Business tax (30% and 25%, reduced for SMEs) below countries such as the U.S.A. and the OECD average.> Attractive system of business tax deductions (actual rate: 18.0%).> One of the lowest VAT rates in the EU (16%, 7% reduced rate). Starting in July 2010, the VAT was raised to 18%, 8% for the reduced rate, as a deficit reduction measure.


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Government deficits and debt

2001 2002 2003 2004 2005 2006 2007 2008

Government deficit

% of GDP

-0.7 -0.5 -0.2 -0.4 1.0 2.0 1.9 -4.1

General government debt

% of GDP

61.9 60.3 55.3 53.4 50.6 46.2 42.1 47.0

General government revenues

% of GDP

38.0 38.4 38.2 38.5 39.4 40.4 41.1 37.0

General government expenditures

% of GDP

38.6 38.9 38.4 38.9 38.4 38.4 39.2 41.1

BUSINESS ENVIRONMENTA. Economy – Government Deficits and Debts

The fiscal deficit is projected to decline from 9.2% of GDP in 2010 to 6.3% in 2011 and to 4.4%in 2012, mostly reflecting measures to lower spending. Some planned spending reductions in 2012 still need to be specified and the government stands ready to introduce further measures if needed.



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MARKETA. Geographic Location

Exceptional location for key markets in Southern Europe and Latin America.

More than 10,300 foreign companies are already established in Spain, 75 of which are Forbes Top 100 multinationals.

Source: [email protected]


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More than 500 million consumers in Europe.

Gateway to the countries of North Africa, with 209 million consumers. (World Bank, 2010)

Hub for South and Central America, with over 578 million consumers. (World Bank, 2010)

MARKETB. Access to more than 1.2 billion

consumers

Source: [email protected]


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INVESTMENT CLIMATE/ BUSINESS INCENTIVE

Foreign investment in Spain is unrestricted except for investments in the following sectors:

Air transportation

Radio and television.

Minerals and raw materials of strategic importance.

Gambling

Telecommunications

Manufacturing, marketing and distribution of weapons and explosives for civil use and activities related to national security.

Investment in these sectors and in other regulated activities, such as banking and financial services, is subject to specific regulations and may require administrative authorization.

Source: PKF Doing Business in Spain, 2010


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INVESTMENT CLIMATE/ BUSINESS INCENTIVE

No exchange control or currency regulations except those relating to money laundering and terrorism, and obligations to provide information to the authorities to allow them to maintain statistical and tax control on the flows of funds.

Tax incentives for R&D&I are among the best in OECD countries, with Spain ranking 2nd behind France. Extensive and comprehensive system of aid and incentives developed by the central government and other government bodies, with a special emphasis on promoting permanent employment and research, development and technological innovation (R&D&I)

There are grants for, among other things:

Technological improvements

Research

Regional development

Job creation



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EASE OF STARTING/ DOING BUSINESS

In terms of ease in doing business, Spain is ranked 49th out of 183 economies. Singapore is the top ranked economy in the Ease of Doing BusinessSource: PKF Doing Business in Spain, 2010


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STRUCTURAL SUPPORT

Ultramodern transportation infrastructure

Affordable utility and telecommunications costs.

Competitive costs for office and industrial warehouse rental.

Advanced ICT network

Energy costs lower than the EU averageSource: [email protected]


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MANPOWER RESOURCES

Spain is among the top 20 out of 169 countries, rated as having "very high human development" for their social welfare, health and level of education.

Workforce of 23,121,500 people (Source: National Statistics Institute, 3rd quarter 2010).

Spaniards are highly educated and the country ranks 7th among EU countries in post-secondary education students.

Spain has a highly qualified workforce, ranking 4th in Europe in people with post-secondary education in scientific/technical areas, behind Germany, United Kingdom and France. However, Spain has a higher ratio of scientific and technical workers with post-secondary education to the general population than these three countries, surpassed only by Finland and Denmark.

Source: http://www.fco.gov.uk/en/travel-and-living-abroad/travel-advice-by-country/country-profile/europe/spain


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MANPOWER RESOURCES

A multicultural country with a growing immigrant population.

One of the highest scores in Europe for long-term employment and business process outsourcing, according to A.T. Kearney.

Three Spanish business schools appear among the top 20 in the ranking by the Financial Times: Global MBA ranking 2010.

There are a total of 28,361 primary and secondary schools in Spain (of which 8,621 are privately-run), and a considerable number of bilingual schools of different nationalities. This allows for the integration of foreign students in Spain, as reflected by the fact that there are currently 100 foreign students enrolled for every 1,000 Spanish students.

In addition, there are 50 public and 28 private universities, offering a broad range of disciplines. There has been a notable increase in the number of foreign students enrolled in official masters (18.4% according to data from the Ministry of Education)


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POLITICAL, CULTURAL, AND SOCIAL CLIMATE

Under the 1978 Constitution, Spain is a parliamentary monarchy. The King is the head of the state and he monitors the functioning of the democratic institutions in accordance with the Constitution.

The country is governed by a bicameral parliament known as the Cortes. This comprises a congress of deputies (Congreso de llos Diputados) elected every four years by universal suffrage and a senate (Senado) of directly elected representatives from the provinces and regions. Spain is comprised of seventeen autonomous regions, with a total of 50 provinces. The autonomous regions or communities share in the centrally collected tax revenues and directly collect certain taxes that are reserved to them.

Spain is one of the safest and most politically stable countries in Europe, with good international relations.


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POLITICAL, CULTURAL, AND SOCIAL CLIMATE

• Spain is ranked 2nd in Europe in quality of life by expatriates.• Barcelona and Madrid are among Europe's top 10 business cities, according to the European City Monitor 2010 report prepared by Cushman & Wakefield.• The 2009 reported crime rate was 45.8 offenses per 1,000 inhabitants, 23 points below the European Union average.• Spain’s favorable climes are highly rated by foreign investors, particularly when it comes to deciding on a location for their factories or other workplaces.


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PROSPECTS FOR SELELECTRICITY GENERATION

Electricity generationTerawatt hours (TWh) 2000 2001 2002 2003 2004 2005 2006 2007 2008

France 536.1 545.7 553.9 561.8 569.1 571.5 569.3 564.4 569.9

Germany 572.3 581.9 582 601.5 608.5 613.4 629.4 629.5 626.7

Italy 269.9 271.9 277.5 286.3 295.8 296.8 307.7 308.2 312.4

Japan 1048.6 1029.8 1048.4 1037.5 1067.2 1088.4 1093 1123.5 1078.1

Korea 288.5 309.1 329.8 343.2 366.6 387.9 402.3 425.9 440.5

Spain 222.2 233.2 241.6 257.9 277.2 288.9 295.5 300.2 306.5

United Kingdom 374.4 382.4 384.6 395.5 391.2 395.4 394 392.3 386.2

United States 4025.7 3838.6 4026.1 4054.4 4147.7 4268.4 4274.3 4322.9 4329.4

EU27 total 2996.7 3077.1 3099.1 3187.4 3252.6 3273.7 3318.4 3327.9 ..

OECD total 9618.5 9486 9772.8 9869.7 10115.1 10385.7 10460.9 10645 10633.2

Brazil 349.2 327.9 345.7 364.9 387.5 403 419.3 445.1 ..

China 1356.2 1472.4 1641.4 1908.5 2201 2499.6 2864.2 3279.2 ..

India 562.2 581 598.4 635.2 667.6 699.1 753 803.4 ..

Russian Federation 876.5 889.3 889.3 914.3 929.9 951.2 993.9 1013.4 ..

World 15378 15477.2 16085.1 16678.7 17446.6 18226 18934.5 19771.1 ..

Electric power generation in Spain has been growing at an average of 4.08% from 2000 to 2008, compared with OECD’s average of 1.26%, and World at 3.06%

SOURCE: OECD Factbook 2010: Economic, Environmental and Social Statistics - ISBN 92-64-08356-1 - © OECD 2010


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PROSPECTS FOR SEL

PRESENT SEL BUSINESS IN SPAINCurrent Sales and Support:

> No physical office in Spain

> 1 Application Engineer based in Lima, Peru

> 1 Integration Engineer based in Limas, Peru

> 3 Customer Service (Regional Sales Manager, District Sales Manager, and Customer Service Representative) based in Trinity, Florida

> Sales in Madrid and Getxo served thru Pentex S.L.

SEL Office/ Branch in Europe - Italy

Source: http://www.selinc.com/support/


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SETTING-UP BUSINESS

Joint ventures with other companies set up in Spain:

> Joint ventures are one of the most attractive and ideal ways of doing business in Spain, given that the y provide f or sharing risks

and combining resources and experience.

> Different forms of joint ventures:

• Economic Interest Grouping (EIG) or European Economic Interest Grouping (EEIG).

• Temporary Business Associations (UTEs).

• “Participation Account”: a form of collaboration with one or more Spanish entrepreneurs contemplated by the Spanish legal system.

• Joint ventures through SAs or SLs.


PROSPECTS FOR SEL


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SETTING-UP BUSINESS

Other ways of investing:

• Entering into a distribution agreement.

• Opera ting through a representative.

• Opera ting through a commission agent.

• Setting up a franchise.

PROSPECTS FOR SEL


Doing Business In Spain And Preparing Hr For The Challenge A Business Study

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