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OECD Territorial Reviews: Madrid, Spain 2007

image of OECD Territorial Reviews: Madrid, Spain 2007

Madrid has experienced impressive dynamic economic growth in recent years, making the best of the positive business cycle in Spain. The capital region absorbs more than a half of the total FDI in Spain and has extended its economic relations with Latin American countries. Growth has occurred largely in the service sector (financial, banking, business services) as well as in logistics (Madrid Barajas Airport is the largest employer in the region). The large investment in public goods, and particularly in transportation infrastructure and cultural amenities, has contributed to attracting firms and workers, creating a virtuous cycle of accumulated wealth. Unemployment has reached a low level (6.5% in 2006) and the growth rate has surpassed the national average as well as the average for OECD metro-regions. There is, however, a concern with how to sustain this positive economic path in the long run. The main challenges to be addressed include a relatively low productivity level, insufficient specialisation in high-value added manufacturing activities, a low innovation capacity, job-skills mismatches (especially for immigrants), transport congestion and housing rental shortage. Public policy making and the governance framework have evolved to provide the metro-region with many of the institutional resources that are needed to make decisions and effectively implement public policies. However, some adaptations will be necessary to effectively address the forthcoming challenges.

The Territorial Review of Madrid is integrated into a series of thematic reviews on metropolitan regions undertaken by the OECD Territorial Development Policy Committee. The overall aim of these case studies is to draw and disseminate horizontal policy recommendations for national governments.

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Innovative Governance for a Competitive Metro-Region

Madrid’s success has been linked with its institutional resources since the end of Franco’s dictatorship. Before the first democratic elections in 1979, the central government controlled the activities of municipalities and appointed the mayors. With the creation of autonomous communities (1979-1983) and the democratisation of local governments in 1979, a more organised and pro-active approach towards the development of the region has accomplished in Spain. In Madrid, a specific case where the region fits approximately within the functional area, the regional government has managed to play the role of a metropolitan government with strong legitimacy and resources. This is not the case in many OECD metroregions that lack a metropolitan governance framework. Empowered with strong financial, political and legislative competencies, the region has created a very good infrastructure and delivered a number of policies that have contributed to Madrid’s recent economic success. This model has been praised by many scholars and made the envy of many other stakeholders in metropolitan areas that are confronted with the lack of a strong and legitimised metropolitan structure.

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