Digital transformation, the phenomenon that companies and institutions are urged to improve their efficiency and not be left behind, is going to be one of the main protagonists of the Next Generation EU fund, also known as the European Recovery Fund.
Spain will allocate 33% of the budget for these funds to different digitization projects. A percentage that is above the 20% set by the European Union (EU). These funds are also structured around another great transformation vector : the ecological transition, with 37% of the funds.
Gender equality and social and territorial cohesion are also included as key transversal axes. The National Plan for Recovery, Transformation and Resilience also develops ten policies that integrate 30 lines of action.
“The funds will have a very wide coverage and many sectors will benefit from them, boosting the business fabric and helping both large and small and medium – sized companies, ” says Blanca Montero , Deputy Director General, Business Director Institutional and head of European Funds at Banco Sabadell.
Sign up for the webinar European Recovery Funds: Impact on Sectors and Companies , led by Blanca Montero, Deputy Director General, Director of Institutional Business and Head of European Funds at Banco Sabadell and Sofía Rodríguez, Deputy Director General and Chief Economist at Banco Sabadell, organized by HUB Banco Sabadell company . Date: Wednesday, February 24. 16h
The importance of digitization in the Spanish economy
This digitization is a key vector for the Spanish economy as it directly affects one of its most important structural problems: the lack of productivity growth . “The saving of time and costs in the functions of the companies translates into efficiency gains and increases in the returns per hour or employment of people,” says Montero.
In his opinion, digitization is an enabler of innovation. “Another of the pending subjects in Spain according to the comparison of the effort in R + D + i carried out with respect to other references, such as the United States, South Korea or certain European countries”.
In Spain, the size of the digital economy reached 19% of gross domestic product (GDP) during 2019 and the current situation caused by COVID-19 is expected to strengthen habits that boost the sector such as teleworking or electronic commerce , according to reveals the report Digital Economy in Spain, prepared by the Spanish Association of the Digital Economy (Adigital).
The document concludes that its direct impact, made up of companies whose main activity is digital, already represents 9% of GDP, which shows that it is already the second most relevant sector in the national economy, only behind real estate.
It is true that the Covid-19 pandemic has accelerated the digitization process of many businesses, but at the same time it has highlighted the enormous deficiencies in this field. Experts agree that, regardless of which sector companies operate in, the transition to a digital model is the only way to compete today and, at the same time, a source of value generation.
“The key will be that, for the first time as a country, we know and can take advantage of 100% of the funds through initiatives that help modernize our economy. We must be able to generate projects to absorb all the money we receive in the coming months ”, warns economist Josep Salvatella, CEO of the consulting firm on digitization RocaSalvatella.
Similarly, Blanca Montero stresses that Spain will have to carry out an ambitious effort from the point of view of the implementation of the aid, since the absorption of European funds in the 2014-2020 period was only 39%. With the recently approved regulatory changes, the greater involvement of public administrations and the inclusion in the General State Budgets (PGE) should improve the degree of execution.
“The European Recovery Fund is a challenge because it aims to promote a transformation of the Spanish production model under the premises of sustainability, digitization and social and territorial cohesion and equality; and, all this, with a very demanding deadline for its development, which will require good planning on the part of all, since we risk competitiveness as a country ”, adds Montero.
In the same way, the experts agree, it is also crucial to choose projects with potential, transformative power and that are capable of exerting the dragging effect on the economy, thus increasing productivity and raising the growth capacity of the Spanish as a whole in the long term.
Aid as a boost to the digital economy
The Recovery Fund Europe and is a unique opportunity to mitigate the economic effects on European society caused by the coronavirus pandemic. This item, approved last July, is endowed with 750,000 million euros until 2026. Spain is precisely one of the great beneficiaries of this fund that should help to reactivate and modernize the economy of the future on the continent. The country will receive 140,000 million euros, of which 72,700 million euros will come in the form of transfers (direct aid).
To receive and channel these billions of euros, the Government will use different Next Generation EU programs, including the Mechanism for Recovery and Resilience (MRR), React-EU, the Horizon Europe innovation program or the InvestEU and Strategic Investment Facility funds. Investment in digitization will be fully dedicated to deploying the Spain Digital 2025 Agenda strategy, which is the roadmap established by the Spanish Executive.
Some of the specific objectives of this agenda for that year are the improvement of digital connectivity, the promotion of disruptive technologies such as artificial intelligence , the modernization of the business fabric – with special focus on SMEs and companies in tractor sectors such as the construction , tourism, food processing, transportation, automotive and metalworking- and public administrations, creating ecosystems technology – based entrepreneurs (hotbed of startups ), strengthening the cyber security and economy of the data , the protection of digital rights and the improvement of the digital capacity of the population.
The strengths and weaknesses of the digital economy
The Digital Economy and Society Index (DESI) ranking of the European Commission reveals that, in the field of digital transformation, Spain has some strengths. It has, for example, an advanced infrastructure network, extensive coverage of its 4G networks and relatively high levels of digitization of the Public Administration within Europe.
However, progress in recent years has been more limited in the field of companies, especially in the fabric of SMEs , in the field of R + D + i and in the digital training of the population. These data coincide with the SWOT Analysis: Digital Transformation in Spain 2020 , presented in October by the Government.
“Spain suffers from high-level digital human capital due, among other reasons, to productive specialization and the low participation of high-tech manufacturing,” laments the Banco Sabadell expert Blanca Montero. And remember that there are still areas “that do not have reliable and quality digital connectivity, both in rural areas and in certain industrial areas, which slows down the digitization of industry, generates social and territorial gaps, and conditions the quality of the experience in tourist destinations ”.
Telecommunications, the backbone sector
Although the requirements and conditions to receive European aid have not yet been defined, priority will be given to some sectors particularly hit by the crisis, such as tourism , in addition to other areas such as agri-food, sustainable mobility and the electrification of vehicles, safety and the biosanitary industry.
The telecommunications sector will also be one of the great beneficiaries because it will backbone all this technological development. In addition to traditional network companies, all computer programming and consulting activities, app developers , Information and Communication Technologies (ICT) industries or the audiovisual segment, among others , will benefit .
Along with transparency when awarding projects and promoting public-private collaboration, Salvatella considers it essential that incentive mechanisms be established that “reward or prioritize those projects that incorporate SMEs or startups into their execution models”.
In his opinion, this formula is an effective measure for small and medium-sized businesses to grow. “You have to get SMEs of a more medium size (200 to 500 employees), highly competitive, exporting, highly digitized and energy dependent. A powerful business network of medium-sized companies with innovative capacity can transform our production model ”, he concludes.