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OECD Territorial Reviews: Madrid, Spain 2007

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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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Strategies and Policies for a Path of Long-Term Competitiveness

Madrid has benefited greatly from democracy and globalisation. Once the capital city of an economically and politically isolated country, Madrid has become an important international hub. In terms of economic growth its performance has been among the best within OECD urban regions during the last decade. Madrid has been able to benefit from the overall good performance of the Spanish economy, as is reflected in the production growth figures, and in the level of almost full employment. Ongoing structural macroeconomic reforms, characterised by the streamlining of the regulatory framework, the increased exposure of product and factor markets to international competition, and prudent fiscal and monetary policies, have stimulated a gradual move towards the technological and managerial modernisation of Spanish enterprises in general, and those located in metropolitan regions in particular. In addition, as a capital city, Madrid has also benefited from a relatively large share of the total central government resources that completed regional and local governments’ efforts for the improvement of urban infrastructure. In recent years the city has also been an important focal point for the increasing flows of immigration and foreign investment that are occurring in the country. This overall scenario of growth, combined with the cities' capacity to attract immigrants, new investments and firms, have created a positive environment, and a perception amongst policy makers that Madrid is competing with the main cities in Europe. Of course, such a good achievement has generated positive expectations among the local community. The goal of the development strategy implemented by the city government, for instance, is to transform Madrid into the most important metropolitan region in Europe only after Paris and London.

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