Long abstract

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Madrid has captured the advantages of globalisation by becoming a metropolitan region of 6 million people, which attracts foreign workers and firms. The capital region has experienced impressive dynamic economic growth in recent years, making the best of the positive business cycle in Spain. It absorbs more than half of Spain’s total foreign direct investment (FDI) 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). Unemployment has fallen to a low level – 6.5% in 2006 – while the growth rate has surpassed the national average as well as the average for OECD metro-regions. This overall positive environment has generated expectations among the local community, with the city government aiming to become the “most important metropolis in Europe after Paris and London”.
There is however concern about 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 a shortage of rental housing. In the present positive environment, public authorities in Madrid will need to consider a well-rounded strategy promoting longer-term shifts in economic, labour market and spatial structures to sustain the robust growth path.
Developments in public-policy making and the governance framework in Madrid have provided the metro-region with many of the institutional resources necessary to make decisions and effectively implement public policies, yet some adaptations will be necessary to address effectively the forthcoming challenges.
This Policy Brief looks at some of the challenges and at the possible solutions put forward in a new OECD Territorial Review of Madrid.