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Foreign direct investment generates 4.3% of employment in the Valencian Community, 2.2 percentage points lower than the national average

Foreign direct investment is an indicator of an investor’s trust in a given economy to the degree of wanting to establish long-term business operations. It is considered foreign when at least 10% of the capital of a company is owned by non-residents. The importance of this type of investment is that it contributes to boost sectors in which an economy has competitive advantages. For this reason, there is a need to increase this type of investment which tends to focus on firms that are more productive, technologically more advanced, and with greater human capital.

In the case of the Valencian Community, its weight of foreign investment is less than what it should be according to its economic size. Thus, in 2017, foreign investment in the Valencian economy (1,159 million euros) only represented 4.9% of the Spanish total (23,758 million euros). However, these figures should be interpreted with caution, since investment is allocated to the region where the company has its headquarters, there is a bias in favor of Madrid. To avoid this, it is best to consider the employment associated with foreign investment, although in the case of the Valencian Community it is reduced. Specifically, foreign investment generates 4.3% of total employment in the Valencian economy, which is below Spain’s level (6.5%). In addition, the weight that the Valencian economy has on Spain’s total employment level (approximately 9.8%) does not correspond to the region’s weight in employment produced by foreign investment (6.9%). Consequently, there is a need to increase the weight of foreign investment in the Valencian region by designing an action plan that involves public administrations and businesses.