NastaONE "Spain from a Business Perspective" (English)

SPAIN FROM A BUSINESS PERSPECTIVE

Spain: platform for business in EU, Latin America and Africa

Report produced by NastaONE, published in The Economic Observer on April 14th, 2008 This report can be read online in English and Chinese at www.nasta-one.com and www.eeo.com.cn Project Director: Patricia Pal www.estudiocraft.com Art Director: Matías García Posadas English Translation and Edition: James Southeran

INDEX OF INTERVIEWEES

SPAIN FROM A BUSINESS PERSPECTIVE

Ángel Martín Acebes, Executive Vice President

Pedro Nueno, President

Javier Gómez-Navarro, Chairman

Antonio Garrigues Walker, President

Sergio Delgado, President

Miguel Ángel Villanueva, President

José María Álvarez-Pallete, CEO & General Manager

Juan Lladó, Executive Vice President & CEO

José María Aldecoa, President

Nicolás Fúster, President

Santiago Iniguez, Dean

Carlos Losada, General Manager

Aurelio Herranz, President

www.icex.es - www.spainbusiness.com

www.ceibs.edu

www.cscamaras.es - www.camaras.org

www.garrigues.com

www.ibericaoverseas.com

www.esmadrid.com - www.promocionmadrid.com

www.telefonica.com

www.tecnicasreunidas.es

www.mondragoncorporation.com

www.albatros-sl.com

www.ie.edu

www.esade.edu

www.itssa.es

Fernando Calvo, President

www.covex.com

César Cañedo-Argüelles, President

www.prointec.es

Amador Márquez, President

www.bobitrans.com

Antonio Sánchez, President

www.egiaudio.com

Manuel Álvarez Álvarez, President

Rafael Miranda, CEO

José Luis López de Silanes, President & CEO

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www.alvarezbeltran.com

www.endesa.es

www.clh.es

INTRODUCTION

SPAIN FROM A BUSINESS PERSPECTIVE “During 2007, Spanish exports to China increased by almost 16% and

Ángel Martín Acebes

Spanish investment there is also expanding significantly. I think that perspectives are very promising and that opportunities will grow in as far as we are able to consolidate strategic alliances between both nations.

www.icex.es www.spainbusiness.com

The range of services that ICEX offers today includes all of the steps in the process of internationalisation. Which is to say we have programmes directed at those companies who have never operated overseas and, as a result, we teach them how to get started and how to export. We also have specific support programmes for companies that have already begun exporting and are trying to find distributors and consolidate in overseas markets. In addition, we help businesses to organise themselves and take part in trade fairs.

The participation of Spanish companies is very high in all of the fairs we organise.

What is your vision and experience about China’s potential?

ICEX already has plenty of experience working in China. We carry out some kind of activity on the country practically on a weekly basis. The existence of trade and economic offices in Beijing, Shanghai and Hong Kong means that our relationship with the Chinese market has been very close for many years.

What is perhaps new is how we have increased the volume of activity and the number of actions we've undertaken there.

As a market, China has enormous potential for economic growth. It's an economy that is growing at a rate above 11% and, as a result, is a market with major opportunities for Spanish companies.

Because of this, we have selected China as one of the priority markets in which we will be focusing our actions.

Although Spanish businesses have arrived in China later than those companies from other nations with similar development levels to our own, the experience that our companies have in Latin American markets and, more recently, in European markets, enables them to now approach the Chinese market in a more robust way and also with the perspective to be able to benefit from the unlimited opportunities it offers.

At present, there are approximately 450 Spanish companies established in China and it's interesting to note that the first ones into the market were not the large concerns but rather small and medium-sized companies which opened the way that, thereafter, was followed by the larger Spanish firms.

Among the most recent cases are the entry of Telefonica and Spanish banks, with entities like the BBVA and La Caixa which are making significant investments in the Chinese marketplace.

Furthermore, from an investment perspective, Spain has gone from being a recipient of foreign direct investment to become a net provider of investment, accumulating a stock of direct investments overseas which did not even reach 1% of GDP in 1980 and which, today, now stands at around 35%.

A country of considerable opportunities also implies considerable challenges.

We have a campaign entitled 'Spain, Technology for Life,' the primary aim of which is to strengthen the image Spain has on a international scale in the industrial and technological sphere under which we are highlighting the differentiating factors of the image we want to convey in China.

Because of this, the basic challenge is to explore the market and then draw conclusions, given that one sector is not the same as another and that China represents a very heterogeneous reality: the east of China is not the same as the interior or western China and so it's not a simple market.

On one hand, we are focusing on the Spanish language as an economic asset, recognizing the Spanish language as an asset that we should all take care of and make the most out of.

The main challenges for Spanish companies are: firstly, to get in; then to consolidate; and, finally, to acquire the size and power sufficient to be present in a stable manner. Which is to say, arrive with a view to staying.

'Spain, Technology for Life' is because we think Spain has to stand out in China, because we are the eighth economy globally, a hightech country in certain technologies such as, for example, aeolic energy – in which Spain is a world power, just behind Germany – desalination, or air-traffic control: three in five planes flying around the world use Spanish air-traffic control systems.

We're also leaders in infrastructure and, as a result, in China we should be transmitting the image of what Spain is today; a modern nation and technologically highly advanced.

Which sectors of the Spanish economy do you see as having the most potential to break into the Chinese market?

To illustrate what I'm talking about, here are three examples of things we're already doing in China:

A massive social transformation is taking place in China which is seeing the appearance of a middle class with per capita income levels similar to those of an OECD developed nation and, as such, we see there are major opportunities for what we could call Spanish consumer goods, as long as we place them in premium-quality segments.

Obviously there's a lot going on both in terms of quantity and quality. This also shows the interest of Spanish companies in China is growing constantly.

Absolutely. Even though Spanish businesses may have come late to China, I can tell you that they are now taking part, and increasingly so, in all of the activities that ICEX is undertaking in the nation. We have no problems bringing Spanish companies into our extensive programme of activities. I'd say that China is now firmly on the radar and on the agenda for Spanish companies and I believe this trend will continue to grow.

During 2007, Spanish exports to China increased by almost 16% and Spanish investment there is also expanding significantly. I think that the perspectives are very promising and that opportunities will grow in as far as we are able to consolidate strategic alliances between both nations.

China is now firmly on the radar for Spanish companies and I believe this trend will continue to grow.

In this sense, the official visits, both that of President Hu Jintao to Spain and that of President Rodriguez Zapatero to China, have helped enormously as have the many institutional events which took place during the 'Year of Spain in China.' All these events logically contributed to greater understanding and created a favourable climate for Spanish companies to actively participate, and increasingly so, in the tremendous potential the Chinese market offers.

Let's hope that, from now on, every year is the 'Year of Spain in China'...

Without a doubt. It's important that we keep working on elements of continuity. ICEX has also signed an agreement with CEIBS so that we continue to give education huge amounts of importance and, at present, we have some thirty people on work placement in China who will receive thirty months of training so that,

I'm referring to the footwear sector, for example, or the housing sector, in which Spain has important companies. The clothing and fashion industries are also sectors with a lot of potential and so there are opportunities from that notional demand and potential which is tied to the creation of a comfortable social class which aspires to greater consumption and has levels of income and wealth that enable quality segments to take their place.

We've held a forum for technological cooperation in Tianjin between almost a hundred Spanish and Chinese companies.

Also, last November, we took part with more than one hundred Spanish companies in the 'Food and Hotel' fair, which is considered China's most important fair for food, beverages and hospitality. Our participation, by means of an Official Spanish Pavilion, was coordinated by ICEX and formed part of the activities of the 'Year of Spain in China' as well as the 'Plan for the Promotion of Agricultural and Food Products in China', and had the support and collaboration of Spain's Trade and Economic Office in Shanghai. This fair was complemented by a presentation of Spanish gastronomy, in which chefs from different Spanish autonomous communities shared and showcased the range of Spain's cooking, which is also a byword for innovation.

In addition, we see opportunities for industries that include agricultural and food products, such as quality Spanish wines.

Sectors involved in sustainable development, in which Spain is a leader and boasts important multinationals, also has a lot of potential both in renewable energy and for companies that treat, manage and desalinate water resources, as well as in the treatment of solid waste or aeolic energy. All of these are sectors linked to one of the greatest challenges the Chinese economy faces, the sustainability of its development.

The growing interest of Spanish companies to enter the strong Chinese market demands activities that support and guide internationalisation, such as the 'Forum of Famous Spanish Brands', that took place with the support of Spain's Trade and Economic Office in Shanghai, and the day entitled 'The Power of Brands. Success stories of Leading Spanish Brands in China'. Attended by more than 100 people and with 27 media companies represented, leading Spanish Brands active in China offered their experiences about how to enter and consolidate in such a powerful and competitive market. Torres, Lladró, Garrigues, Inditex and F.C. Barcelona explain which brandbuilding strategies had led them to international success and their positioning in China.

In the same way, there may be major opportunities for the infrastructure sector: the top ten companies worldwide in infrastructure and construction management are Spanish and are operating around the world on a large scale, meaning they may also find an important niche for their activities in the country.

I'm sure that, with time, new sectors of opportunity will appear as the economic relationship between Spain and China grows and consolidates.

ICEX is the most active ambassador of Spain's image on the world stage. What image of Spain do we have to create there and what do the Chinese need to know and remember about Spain?

We have also organised a 'Forum for Business Cooperation' in Beijing, where Spanish companies from various sectors held interviews and meetings with more than 350 Chinese companies who were looking for partners to do business with. These are just some examples of our ongoing activity in China.

We are helping to create an image of Spain and 'Made in Spain' internationally.

ICEX has a 'Promotional Plan for Spanish

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, &(;

To achieve this, we have our own financial, material and human resources available and our work is carried out fundamentally through the 98 economic and trade offices we have in foreign countries.

Brands' and, with the 'Plan for the Internationalisation of Technology', for the communication of Spain's technological image in China.

Yes, China is a very interesting country but it isn't easy. It has a complicated market, culturally distant from our own and with which we don't share a common history as occurs with other countries. In this sense, it is still a market to be discovered.

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ICEX is an agency whose objective is to support Spanish companies which are in the process of operating internationally. To do so, we devise and undertake trade promotion programmes in overseas markets with the aim of stimulating and facilitating the international scope of Spanish businesses, helping them to export, invest overseas, work together with other companies and set themselves up for trade and production outside of Spain.

trend will continue to grow.”

, &(;

Introduction to the mission and principal services of the Spanish Institute of Foreign Trade, ICEX

China is now firmly on the radar for Spanish companies and I believe this

later on, they can work in export departments or in the internationalisation of Spanish companies in China.

Since we started the 'China Plan' in 2006, a three-year programme which is currently in progress, we have carried out more than 1,471 promotion activities in which 2,967 Spanish companies have taken part. It's obvious that China is a priority market for us.

Commercial Offices in China: BEIJING Spain Building, 5th and 6th Floor Gongtinanlu A1B, Chaoyang District Tel: 00861058799733 Fax: 00861058799734 SHANGHAI 25th. Floor, Westgate Mall 1038 Nanjing Xi Road Tel: 00862162172620 Fax: 00862162677750 HONG KONG 2004 Tower One Lippo Centre 89 Queensway Admiralty Tel: 0085225217433 Fax: 0085228453448 To find out full information about ICEX calendar of activities in China 2008 please visit: www.spainbusiness.com

VISION

SPAIN FROM A BUSINESS PERSPECTIVE that Masters was done by Professor Gareth Dyas, a colleague from INSEAD.

Pedro Nueno

We persevered with it for almost 10 years and became aware that there was actually a growing interest in China for MBAs and there was nothing available in this field, so something was just waiting to be done.

www.ceibs.edu www.iese.edu

We thought that, if the project had worked in Argentina and Mexico, and we had been doing it for eight years in Beijing, we should start to refine it and make it more ambitious.

Professor Pedro Nueno, the Executive Chairman of CEIBS and a Professor at

What can Spain offer China?

We went to Shanghai to present the project and the local government told us they agreed with everything so, on November 7 1994, with the backing of the EFMD (European Foundation for Management Development), with the academic collaboration of IESE, and with financial help from the European Union and more than 20 multinationals, we signed an agreement between the EU and Shanghai's government which subsequently was implemented as a joint-venture between the European Association of Management Schools and Jiao Tong University, Shanghai.

IESE, is the driving force behind the pro-active contribution made to relations between Spain and China: he saw the potential and importance of developing links between the two nations more than 20 years ago when, to the rest of Spain, China and Asia appeared only as a vague reality, obscured by distance From your point of view and experience, what is your opinion of China's potential at the present time?

At present, it would hardly be news to point out that China's potential is simply enormous, but what is happening is that, as more time passes, this potential is coming to light in different sectors.

lopment model we've already seen in different countries is repeated.

The first phase of China's economic development can already be seen: now exporting from China is no longer as attractive as it used to be a few years ago and, at the last

And that's how CEIBS was born, with the twin objectives of contributing to the economic development of the country and educating Chinese executives so they could work in the European and American subsidiaries of companies established both in Asia and in the rest of the world.

The principal engines of this economic progress have been the export of low-cost, unskilled products and foreign investment into China – in part to manufacture or co-manufacture this type of product and, partly, to start to service the domestic market – but, over the years, as a result of this same economic development, the construction process has also begun to take hold because, if people are to gradually move from living in poor conditions to living in an apartment or a house, obviously building had to take place.

If we look at what happened in Europe after the Second World War, we see that industrialisation came first and then a period arrived when priorities turned to other issues and basic social demands like health, education and pensions began to be provided for.

In turn, this social spending increased costs and Europe stopped being a low-cost exporter while, at the same time, people who had their basic social provisions covered began to develop other expectations and, as a result, the development of the auto industry began, which had lain dormant in the '50s and '60s but which really took off in the '70s and '80s, as did tourism, another sector which grows in a society that has already surpassed certain basic levels.

None of this development process in Europe affected the United States negatively. On the contrary, it was beneficial for everyone because the world's leading companies began to invest in Europe to make the most of its development process and, at the same time, companies that had set up here in Europe began to invest overseas because their products, from yoghurt to tyres and telephones, were perfectly marketable in the US. So, the logical thing is for China to adopt the same route: first, climb out of poverty, then low-cost exports take off, followed by construction and, as basic social needs begin to be provided for and so less has to be saved for health, retirement or the education of children, money can be spent to buy a car or take a holiday. That is to say the same deve-

I believe we are a good place to land in Europe. We have well-trained people, Barcelona's port is the closest in Europe to China and our company laws are very

The University provided us with a lecture hall and a couple of offices, which were all we needed at the time.

For years, the Chinese authorities have maintained a firm commitment to focusing on the economic advancement of the country as their main priority. Above any other goal, China's prime objective is to boost its economic development at the fastest possible rate, as this is the means to lift millions of people out of poverty.

That has been the logical process in the first phase of economic development, as in any other country around the world.

progress is so great, they have so much desire to move forward, that they are prepared to back their partners in whatever it takes so that the success of a project is guaranteed. I don't even think the cultural or language differences are a real problem, as much as the size of the market and the speed at which things change in this economy. What you cannot do is try and manage something there from a great remove, it requires serious, full-time dedication: you need a motivated team and to work out what investments you are going to need to make.

On January 17 1995, we hired our first dean,

CEIBS has opened its first office outside China in Barcelona, embarking on an ambitious plan of international expansion and growing in parallel with China's ongoing integration into the world economy. party meeting, the Chinese Government approved a $50 billion increase for social services. Where will this come from? Well, companies and people will have to pay tax, but if people start to save less and spend money, then another important economic motor is fired up: domestic consumption.

Through the new office in Barcelona, CEIBS will provide support to its extensive network of alumni outside China, respond to growing demand for places to enter CEIBS that come from outside China – 30% for its MBA programme, of which 8% are Spaniards – and act as an administrative office for CEIBS in Europe

Domestic consumption in China is still very low compared to what it will be, but as soon as savings start to be converted into consumption, people start to drive better cars, live in better houses and travel more, that's when a new middle class emerges.

who was one of the professors who had given classes in the Beijing programme and, since then, we have offered a full-time Executive Masters as well as the MBA. They are demanding programmes which immediately produced very good results, and so we continued to launch new programmes for managers.

What is amazing is that you saw this development potential back in the 1980s, when you founded CEIBS. How did it all start?

The first stage of CEIBS began in 1984, but back in the 1950s professors from Harvard Business School started to set up business schools around the world, which was the model I wanted to copy.

Seeing how well everything was working, we hired Leoh Ming Pei, the US architect of Chinese origin, and in 1998 built the Shanghai campus which is a marvel. Since then, the development of CEIBS has been spectacular and today has a major impact worldwide: CEIBS is acknowledged as the best business school in Asia and ranks in eleventh place worldwide according to the Financial Times in its list of the best schools in the world.

One way of developing a nation is to develop its management. Based on this philosophy, I'd worked on the launch and development of a business school in Argentina and, one day, while eating with an Italian professor and a French professor, we came up with the idea: 'What if we were to do in China what the Americans did in Europe after World War Two?'.'

Why not indeed? The deal was done.

flexible in the sense that, if something should not work out, it can be made to work with relative ease, without doubt more so than in France and Germany.

We are a less-regulated economy than others and there's more room here if you get things wrong. For any company planning to set up overseas, the most worrying question is 'And what happens if it doesn't work?' Well, if things don't work out here the problem is less serious than if things go awry in other countries in Europe.

We are welcoming and respectful people who generally accept those from overseas, so it's not hard to see why we get on with the Chinese. As the American professor Frank Folds used to say in one of his mottoes: 'Understanding other cultures can be very difficult, but it's easy enough with plenty of respect' and I believe that'ss a value that we apply very well and, as a result, facilitate foreign investment in this country as well as the possibilities for Spanish companies to go overseas and conquer the world.

SHANGHAI 699 Hongfeng Road, Pudong Shanghai 201206 P.R.C. Tel: +86-21-2890 5890 Fax: +86-21-2890 5678 BEIJING 3/F Raycom Info Tech Park Tower A 2 Kexueyuan South Road, Zhongguancun Beijing 100190 P.R.C. Tel: +86-10-8286 1688 Fax: +86-10-8286 1678

What advice would you offer Spanish companies who want to set up in China?

We negotiated the launch of an MBA in Beijing in 1984. We got professors interested in giving classes there and began to fill the programme up even though, obviously, it wasn't a full-time occupation. We found people from all over the world ready to help us with the project and they were the pioneers with whom we designed a good Masters programme. The first design of

Each business model has its own particular characteristics, but I have to say it was easier for us to get the business school up and running here in China than in Argentina.

SHENZHEN Rm.2302A, 23/F, Han Tang Building Overseas Chinese Town Shenzhen 518053 P.R.C. Tel: +86-755-26935750 Fax: +86-755-26935743

The ambition the Chinese have to make

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OVERVIEW

SPAIN FROM A BUSINESS PERSPECTIVE

Javier Gómez-Navarro President Upper Council of Spain Chambers of Commerce www.camaras.org www.cscamaras.es

Antonio Garrigues Walker President www.garrigues.com

Garrigues is the biggest firm of lawyers and fiscal advisers in the Iberian Peninsula. Its large multidisciplinary team and international scope offer comprehensive advice in every legal and fiscal field, with its 'own brand' founded on quality, service, ethics and business sense.

The Consejo Superior de Cámaras de Comercio (Council of Chambers of Commerce) coordinates the 85 chambers of commerce around Spain and maintains the relationship with the Government. By law, all chambers must spend two-thirds of their budget on training and aid for exports.

Services and activities of the Chambers of What Spanish companies need today is a strong Commerce in Spain push in terms of competitiveness and we are there to help them achieve that objective.

Spain's chambers of commerce are public-law corporations, regulated by a law dating from The chambers are absolutely pro-active 1993 which stipulates that they are institutions bodies and, in this sense, we are working whose mission is to promote economic develop- principally in two areas: on one hand, we are ment in the regions where they are located and going to greatly increase our consultative defend the interests of the economy, industry function and, on the other, we are focusing on and trade in general in those regions. how we can reduce all of the administrative steps that companies have with the governWe are a model of a public body which is ment, so that, in addition to enhancing their managed by the private sector, which is finan- competitiveness, they can cut bureaucratic ced via a tax which all companies pay and and administrative costs. which enables us to have a financial fund with which to develop all of our activities.

As regards improvements to training schemes, we are proposing changes that are required so the current Spanish education system adopts more and improved steps to produce the profile of professionals companies are demanding. The Spanish education system is a good purveyor of knowledge, however it is not so good at transmitting skills or values, which are the two most fundamental aspects for any company.

The principal reason behind the chambers is to support the everyday reality of doing business through three main types of activity: helping them to internationalise, enhancing competitivity and backing training schemes.

We are also the body that collaborates with the central government in a consultative role.

Our obligation is to ensure that the government and the business world are as close as possible, with the aim of creating an environment that enables and promotes the competitivity of businesses: we defend the interests of business with the government and with society, communicating the opinions of companies on all those issues that affect their business activity. At the same time, we transmit the needs of the business world to – our own and foreign -- governments so as to better devise and apply economic policy and bilateral economic relations.

Introduction to Garrigues' current activities around the world Garrigues Abogados y Asesores Tributarios (Garrigues Lawyers and Fiscal Advisers) has had a firm international vision since its origins in 1941. With more than 60 years of history, we are and want to continue to be a global firm which offers comprehensive, high-quality service through our offices in Spain, Portugal, Spain could do more in China in every sense: Brussels, Casablanca, New York, Warsaw, politically, culturally, economically and sociaLondon and Shanghai. lly. The Chinese are interested in Spain and there's interest in our language too, but we Garrigues is part of a major network of interna- have to strengthen the level of interest China tional partnerships: we are members of 'Affini- has in us. The Businesspeople's Circle, the tas', an international partnership made up of the CEOE and all of Spain's business associations most prestigious firms in Latin America and also are intensifying their efforts to do this. At founding members 'Taxland', an independent Garrigues, our intention is to double, at least, alliance of fiscal advisory firms that is present on our activities and the number of clients we four continents and is made up of more than 36 have in China over the next five years. companies and 1,600 professionals.

Being present is China is fundamental and, as a We have 2,000 professionals who figure among result, we have an office there in Shanghai, the leading positions in almost all of the legal from which we provide advice to Spanish and and fiscal specialities listed in the most presti- Latin American investors who want to gious rankings and legal directories, with the establish themselves there and through which aim of continuing to provide service to Spanish we provide services regarding all the legal companies wherever they decide to go. aspects related to foreign investment in China.

For us, our arrival in the Asian giant has In the legal world, as is the case in the business proven a great and fascinating experience. world, some firms become global, others not.

Our objective is to be among the 20 to 25 What expansion plans does Garrigues have global firms in the world which, basically, will for China? be British and American, a few European, some Japanese and also some from China.

For the moment, to open more offices other than the one we already have in Shanghai and As a global firm, we are aware that our presence set up in Beijing and in the new centres of in China has to continue to grow. China is not industrial development in China. only a economic powerhouse but also one of the most important economic axes on the world China is undergoing spectacular development stage. At Garrigues, we realised it has tremendous and taking on board legal changes remarkably potential years ago, but Spanish investment in quickly, but the leap to democracy is never China was – and still is – relatively small and we easy: political freedom, freedom of expression, only set up operations where Spanish businesses a free press and so on, and Spain knows all and their investment are present. about this from its own experience.

In terms of innovation, large businesses have the capacity to undertake research independently or to purchase it from other nations or companies, but small- and medium-sized companies are usually not able to handle research for the simple reason that they don't know how to incorporate it, and at what cost, so we have implemented a programme to help these companies to bring innovation into the production processes.

What would you highlight as the competitive and differential advantages of Spain's business fabric which should be drawn upon in China?

Spain, both in terms of salary levels and development, cannot product low-cost goods as the labour cost is very high. In order to export, it has to produce products with a medium or high level of quality, with a brand.

Spanish companies that are having success around the world, and especially in China, are those that have been able to come up with a design, create a brand and develop their own distribution networks, like the case of Zara or Mango in the clothing sector.

Fortunately Spanish companies have already begun to be aware of China's importance and are gradually turning their vision eastwards.

Spain, generally speaking, was not used to looking toward Asia: neither China nor Japan, not Vietnam, nor India..

In this sense, Garrigues is also contributing greatly: we are using our knowledge of the development of the Chinese legal system to improve our legal guarantees and the application of a new legal system. We bring our experience and understanding to bear in the development of operations in a very For reasons of cultural or geographic proximi- diverse range of projects. ty, Spain has always focused more on Latin America and Europe. In Latin America, Spain The Chinese Authorities are undertaking has invested more than in any other region of huge efforts to improve legal guarantees, the planet, including the United States. Until but there are still important steps to be now, Spain's image of the east had only been a taken in aspects such as intellectual and very vague impression but, in my opinion, the industrial property rights, because if China Asia-Pacific area as a while and China in parti- also wants to integrate into the global cular have become such an major axis that, if context it has to respect international laws. the Spanish business community were not to be China is dealing with a great number of a part of it, it would be like being left out of the changes with great care, improving greatly world, like being in the middle of nowhere. on the whole and witnessing a spectacular jump forward in terms of a modern politics.

As a result, it's very important and positive that now Spanish companies have revised their It is well worth Spanish business taking a close priorities and are starting to get Asia into focus. look at the Asian giant and taking a risk on doing business in the country that has changed Even though we may have arrived in China the economic and political centre of gravity in later than our European neighbours, Spain the world we live in. knows Latin American better than any other nation in the world does. Spain can and must SHANGHAI play an important role in China as a bridge to 3205 West Gate Mall Latin America and work together with Chinese 1038 Nanjing Xi Lu companies in joint investments there.

Shanghai 200041(China) Tel: +86 21 5228 1122 At Garrigues, we can bring a lot to the table as Fax: +86 21 6272 6125 regards the Chinese legal system, as we have a Contact: Francisco Soler legal framework which we've been able to export to Latin America and the Spanish legal francisco.soler.caballero@garrigues.com system is perfectly compatible with Latin Amewww.garrigues.com rican legal systems.

What priority projects are you undertaking at the moment?

Spain cannot compete with China in the wholesale manufacture of T-shirts, as the Chinese will We are behind an ambitious strategic plan and always be able to make them cheaper. Spanish actions to change the chambers into more open businesses have to compete in those market and useful institutions, ready to provide profes- segments where the weight of labour costs is not sional, quality services for current demands, relevant to the sale price of the product. and which facilitate the participation of companies in the development of economic life.

In my opinion, Spain is still a great unknown in China from an economic and industrial We just finished a document in which we have point of view. What is needed first is to informed the government about the primary highlight the fact that Spain is currently the needs of Spanish businesses in order to impro- eighth largest economy worldwide and, as a ve their competitiveness. result, we are an advanced nation in production capacity, in the development of industry If they are less competitive, internationalisa- and in economic development. tion becomes more difficult and, as a result, we have put in action specific programmes to What do you think about economic relafoster innovation in small- and medium-sized tions between Spain and China? companies, systems which will improve processes and productivity and which will Spanish exports to China grew by 20% in 2007 also incorporate new technologies. and, for the first time, exceeded 2 billion Euros according to official figures. This increase is down At present, businesses that are not able to to the combination of various factors, among compete on a global scale are not competitive which we could point to the efforts made by the at a local level either, so the internationalisa- Spanish government – which are beginning to tion of Spanish companies is a real necessity bear fruit; the fact that, little by little, Spanish in order to develop in a global economic companies are becoming more confident about context. Those companies that are unable to moving into the Chinese market and, finally, that internationalise now will, without any doubt, China's entry into the WTO and the reforms have a difficult future ahead. under way in the country itself have opened up new business opportunities for Spanish compaWhat are the main needs of Spanish com- nies. Without doubt, these are very positive signs panies at the present time? but we still have a long way to go ahead of us.

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SPECIALIZED TRIPS FOR BUSINESS AND INSTITUTIONS

SPAIN FROM A BUSINESS PERSPECTIVE we take into account that we're talking about a country with a population in excess of 1.3 billion people.

Sergio Delgado President Ibérica Overseas www.ibericaoverseas.com

I realised that China was going to be the future of the tourism sector and that Spain could reach out and create fruitful collaborative links with it in the development of this market. Spain could be an important partner for China in the development of its own tourism market, as we are the second most important tourism nation in the world and, as a result, are specialists and can offer China our experience and know-how on a global scale.

Together, we could eventually become the world leaders in the sector.

Viajes Ibérica Overseas is a travel agency that arranges trips for official bodies and private companies and which stands out as one of the pioneering companies in strategic alliances with its Chinese counterparts in the tourism sector.

How would you describe the strategic and differential advantages that Ibérica Overseas has in such a competitive sector as tourism?

Obviously, in a global context as ferociously competitive as that in which we live today, the first parameters to be taken into account are doing as good as job as possible and the quality of the service provided.

Ibérica Overseas was set up in 1985, after the preliminary exercise of a detailed study of the market's needs in the ambit of tourism management of state visits and business trips and, at present, is well known for being specialised in the organisation of trips between Spain and China, both in the public and private spheres.

We entered a sector with high levels of competition, and provided our services thanks to advanced technology. By 1999, we had already signed a number of individual agreements with the leading bodies of the Spanish state and, over the course of the last few years, have reached new collaboration agreements with some foundations and official bodies, even setting our own offices up in their facilities in some cases with the aim of providing the best service possible.

Thanks to our trajectory, Ibérica Overseas has won itself a reputation for credibility and

Our providing experience and know-how to the Chinese market could be combined with China bringing tourists to our country, which would make for an interesting exchange for both of us.

reliability that serves as a guarantee for our clients, based largely on our professionalism and human resources, which have been trained by a highly qualified group of professionals with experience in specialised tourism services.

Spain is also the leader in the organisation of congresses, conventions and incentive travel and, in that sense, we could also serve as a good recipient for China's business class who wished to undertake business trips to our country.

Furthermore, Ibérica Overseas is a partner and member of the Fundación Consejo España-China (Spain-China Foundation Council), made up of large Spanish companies who have investments, a presence or interests in China as well as the Spanish public bodies who are working with these companies.

What are the key aspects of Ibérica Overseas' strategy and what are your main objectives as far as the Chinese market is concerned?

Within the Spain-China Foundation Council, Ibérica Overseas represents the interests of the Sino-Hispanic tourism sector, with the goal of having a voice in the future establishment of a stable legal framework between Spain and China that promotes the development of the sector and the preservation of tourism resources. We believe that the council will be decisive in the legal framework of the Sino-Hispanic tourism sector in the near future.

In terms of strategy, our primary objective at present is to be a good point of contact there both for public bodies and private companies from Spain, offering them great coverage and comprehensive services when they arrive in China.

In the medium- and long-term, our objective is also to channel the flow of Chinese visitors to Spain. In this sense, I think it is vital that both China's businesspeople and tourists begin to discover Spain by coming to our country.

How and when did Ibérica Overseas' activities begin in China?

For our part we need to undertake a major information drive so that our competitive and differentiating advantages are promoted as a tourist destination in the Chinese market, just as other large Spanish companies present in other sectors in China already do, and who, thanks to their activities, have raised awareness of Spain in China from a business point of view.

We started to work in China six years ago, when the tourism market began to open up, a sector with enormous development potential if

Spain wants to move closer to China, a nation where the economy is growing constantly and in a sustained manner by about 12% each year, and with a huge emerging middle class who are the ones who have the economic means to spend and consume, as well as the intellectual desire to visit other nations and other cultures.

Given the vast dimensions of the country, in China there are around 45 million millionaires; more than in all of Western Europe and more than Spain's population as a whole. That gives you an idea of the tremendous potential that the country has on every level and, especially, in terms of tourism, because even though only a small percentage of people may come to Spain as tourists, the overall numbers are very large.

What kind of collaboration and cooperation is Ibérica Overseas undertaking with China's leading tourist operators?

We maintain stable relationships with the leading representatives of China's tourism sector and are developing cooperation projects together. We have agreements with the leading Chinese airline companies, Spanish and Chinese hotel chains and China's leading travel agencies, all of which guarantee the complete satisfaction of our clients when they travel, go to events or on business trips.

Through our Chinese partners, Ibérica Overseas does not act merely as a travel provider, but our responsibility goes much further and we are always on hand to help clients in a personal and full-service way about the most efficient and cost-effective options both in Spain and China for their travel.

We have reached agreements and created alliances with large- and medium-sized companies in the private sector in China and have both institutional and administrative contacts that we are planning to exploit together. We want to develop active collaborations, based on trust and innovation, in the medium- to long-term with our Chinese partners, and develop shared practices with the creation of Sino-Hispanic business units

6

MADRID: A CITY FOR BUSINESS AND PLEASURE

SPAIN FROM A BUSINESS PERSPECTIVE

ned, we made a major effort to improve infrastructure with two new tourist office and four permanent information points and have increased and enhanced the quality of service provided, in search of greater loyalty among visitors.

Miguel Ángel Villanueva President Madrid City Council www.esmadrid.com www.promocionmadrid.com

In 2007, more than 7.3 million tourists visited Madrid. A record number of visitors which saw annual growth in tourism reach 8.4%, well above the national average of 3.5%. The increased amount of visitors coming from overseas is specially notable, given that this has grown by 11.% in 2007 and by almost 45% since 2003.

“Madrid is the gateway to a market of 55 million potential clients in the Iberian Peninsula, but is also the preferred place from which to enter Latin America, Africa and Europe, offering a total market of more than 600 million people.”

Is Madrid a city for business as well as for pleasure?

Without a doubt. At present, Madrid is considered to be one of the top ten best business cities in the world, according to reports from the likes of Standard & Poors or the European Cities Monitor by Cushman & Wakefield.

Madrid offers investors a solid and diversified economy which is developing in a stable and favourable environment. The Council has introduced a flexible model of administrative policies for companies, in order to obtain licenses and permits which allow them to begin activities and, also, Madrid has one of the lowest tax rates in Europe for businesses: tax breaks which can reach up to 50% are applied for investment activities related to research, development and technological innovation.

What are the foundations upon which Madrid has taken its place in the top ten?

In the first place, sustained and balanced economic growth at an average of 3.9% for the last decade, and at 2.8% to date in 2008.

In second place, its strategic geographic location and up-to-date infrastructure. And, also, a highly qualified and competitive workforce,as Madrid offers a high level of training and specialisation in terms of human resources, tied to average salary costs which are lower than those of other European countries.

All of this in the context of a city that, in addition, offers excellent quality of life and a constant commitment to innovation and technology as the driving force behind our competitiveness.

What advantages does Madrid have both in terms of geographic location and infrastructure?

Madrid is strategically placed as a bridge that communicates three continents: Europe, Latin America and Africa. Madrid provides access a to a market of 55 million clients in the Iberian Peninsula, but is also the preferred place from which to connect to the markets of Latin America, Africa and Europe: in total, a market of more than 600 million people.

Madrid is home to the headquarters of 72% of the leading Spanish companies and is the focus of 29% of the total investment in R&D in Spain.

Madrid's stock exchange (which ranks fourth in Europe and seventh worldwide) is the largest financial market for investments in Latin America: 39 of Latin America's largest companies are listed on Madrid's market on the Latibex index.

As regards infrastructure, the T-4 terminal of Barajas Airport already handles over 52 million passengers a year, positioning Madrid's airport as the fourth most important in Europe and tenth

What do tourists and businesspeople coming from China need to know about Madrid?

The city of Madrid is the leading economic pole in Spain and combines huge amounts of potential as a centre for business, logistics, science and education. According to a study carried out by the leading European Chambers of Commerce, Madrid is the second economic area in the list of those with the greatest forecast for growth on the continent in terms of business development, well above the average in Europe.

around the world. It is the best point of entry and the business card of choice both for Madrid and Spain as a while for all of our overseas visitors and, through Barajas, Madrid lies just 2-3 hours away from the other great European cities.

Madrid's public transport network is recognised internationally as one of the best in the world, and guarantees excellent mobility and accessibility within the city.

Madrid is a dynamic and cosmopolitan city, which is open to other cultures and in which no visitor every feels foreign or out of place, and it's also a city that is working to consolida-

Furthermore, Madrid possesses infrastructure that act as giant magnets for economic activity, as is the case with IFEMA, which holds more than 80 trade fairs a year in which 42,000 companies take part and to which more than 4.5 millions visitors come, of whom 1.5 million are businesspeople. In terms of congress halls, Madrid will soon also have a new International Conference Centre in the area of the 4 Towers, with a maximum capacity of 5,000 people.

Sixteen universities and eight business schools among the most prestigious in the world are located in Madrid, providing interesting opportunities for employment and professional development to university students as well as a very highly qualified workforce for companies.

Mercamadrid, the leading food distribution hub in Spain, serves more than nine million people in a radius of around 400 kilometres. In terms of trading volume, its the second most important in Europe, only behind Paris.

Infrastructure like Mercamadrid, the Freight Terminal at Barajas Airport, Madrid's Dry Dock or Transportation Centre, make our city one of the most important logistics platforms on an international level: 24 million square metres of floorspace for logistics use, to which another 38 million square metres will be added by 2020.

And for pleasure?

All of the advantages come together in Madrid with an extraordinary quality of life, based above all on the city's climate and a spectacular cultural and leisure offer: Madrid has three of the best museums in the world, more than 50 theatres, 28 golf courses, endless restaurants, bars, terraces and cafes to choose from, and five towns listed as UNESCO World Heritage Sites in a 100 kilometre radius: Aranjuez, Alcala de Henares, Avila, Segovia and Toledo.

Tourism is one the most strategic sectors of Madrid's economy, representing around 10% of the city's GDP. As a result, from City Hall we have gradually developed policies in terms of tourism which are based on two main aspects: promotion and improvements to tourism service. As regards promotion, we have worked to transmit a new image of the city, more modern and closer to the reality to how it is today, increasing the investments made in promotional and advertising campaigns. As far as serving tourism is concer-

7

“Madrid is home to the headquarters of 72% of the leading Spanish companies and is the focus of 29% of the total investment in R&D in Spain.

Madrid's stock exchange (which ranks fourth in Europe and seventh worldwide) is the largest financial market for investments in Latin America: 39 of Latin America's largest companies are listed on Madrid's market on the Latibex index” te a model of sustainable urban development for the 21st century, aiming for a more healthy lifestyle, more integrated into social terms and more in harmony with nature.

In summary, we want to convey to the business world and to Chinese society that, in the globalised context in which we live, the city of Madrid – the capital of one of the most solid, stable and dynamic countries on the European continent – is one of the best choices for the location of a new business venture, whether it be professional or personal, and that in order to do so they will to able to count on the firm support of the city's government.

SPANISH GIANTS

TELECOMMUNICATIONS

Introduction to the current scope and positioning of Telefonica in the world.

This growth is due to, among other factors, the fact that Telefonica, years ago, made a courageous commitment and firm, convinced investments in markets that today are growing quickly and in which it has remained throughout all this time and business cycles, as is the case in Latin America.

Recently, we have also made significant investments in Europe – the United Kingdom, Germany and Ireland – with the purchase of O2 and that has positioned us as the most balanced company in Europe and that which has the strongest growth profile.

“Telefonica is in a position to offer the Chinese telecommunications sector a unique added value, because as a public-sector monopoly that was privatised, it has both credibility and prestige in capital markets, a vast client base which is undergoing significant growth, and a successful internationalisation experience.”

TELEFONICA

Telefonica is also a geographically diversified operator, which depends less and less on a single market in terms of the size of the company, as what is outside of Spain is already more significant that the business done with Spain's borders.

It is also one of the leading telecommunications companies that has the greatest prospects for growth, given that it combines size and scale with efficiency and growth as well as being a large company.

José María Álvarez-Pallete CEO of Telefonica International General Manager of Telefonica Latin America www.telefonica.com

Hui Liangyu, Vice Premier of the People’s Republic of China, César Alierta, Chairman of Telefonica, and José María Álvarez-Pallete

TELEFONICA

Telefonica is the world's fourth largest telecommunications operator both in terms of market value, which exceeds 160 billion US dollars, and as regards client number, which currently reach 215 million. Furthermore, Telefonica is one of the leading integrated operators, with a very strong presence in the full range of telecommunications products: mobile, fixed line, broadband and television, and as such is one of the few operators which has a strategy in place for a world in which the convergence of products and services is happening at an ever increasing pace.

Therefore, Telefonica has a very promising future, both for its employees as well as for the investment community, which is recognising these great prospects for growth. In summary, Telefonica is a global telecommunications company.

Mr. Zhang Chunjiang, Chairman of China Netcom, the Kings of Spain, and Mr. César Alierta, Chairman of Telefonica

Without doubt, the experience, presence and know-how from Latin America has been an important asset during our entry into China.

One of the things that has tipped the scales in favour of Telefonica being associated with a Chinese company is precisely that presence that we have in Latin America, given that we are able to export our experience of internationalisation and know-how into this market of Chinese companies: both in terms of a region undergoing growth and due to our internationalisation experience.

We have more than 200 million clients. There are not many companies in the world with that number of clients – apart from some Chinese ones – and that have been able to carry out a process of internationalisation as successfully as we have, with a record of investments that provides us with both growth and credibility in the international investment community.

If we add to this the fact the presence of the Chinese in Latin America is more and more important, we fulfil all of the requirements that the Chinese authorities were looking for

TELEFONICA

The primary beneficiaries of our presence in these markets are always the less privileged sectors, because when we arrived in Latin America the rich already had telephones.

What we did was to provide a universal service at low prices, and where it previously had taken two years and 2,000 dollars to get a 'phone, today it costs 15 dollars and you have it with a maximum legal period of 10 days, as per the contract.

As a result, we are very satisfied with the work we have done in Latin America.

Telefonica would not be what it is today without Latin America, and we are convinced that the Latin American telecommunications sector would not have developed as it has done without Telefonica and, as a result, I believe it has turned out to be very mutually beneficial.

Expansion plans in conjunction with Netcom We currently have the authorisation of the government and of Netcom to reach 9.9% [of its stock] and have placed ourselves at their disposal to do this as soon as possible. We are ready to do this now, respecting the timings set both by the company and the majority shareholder, which is the Chinese state in this case, so we will acquire that 9.9% as and when the Chinese authorities deem it convenient to do so and if, in the future, the possibility to purchase more arises we will do so, but for now the limit that has been approved is 9.9%.

We currently hold 4.9% with an option to reach 9.9%, two board members on the board of China Netcom, one alternate board member, and I am a member of the Strategy Committee of China Netcom. We are increasingly opening up new possibilities of doing things together, have had plenty of management exchange, are considering the possibility of making some joint acquisitions and, in general, feel enormously satisfied with the experience and believe that China Netcom does to.

What role or involvement will Telefonica have in the celebration of the upcoming 2008 Olympic Games in Beijing?

Telefonica's experience and know-how acquired in Latin America are an important asset in China Telefonica works in markets which provide value and has invested 70 billion Euros in Latin America. No other company, from any other sector or other nation, has invested more than Telefonica in Latin America.

If Chinese companies want to change, want to grow, want to become global players, we have something we can offer them: an added value which it is hard to find, because Telefonica was a public-sector monopoly which underwent privatisation, we have credibility in capital markers, our shareholders are more outside of Spain than within its borders, we have a huge client base and immense potential for growth, and we have had a successful experience of internationalisation.

Therefore our value proposition as partners is to put on the table all of our know-how and in exchange be able to participate actively with them, see what they are doing that could be useful to us in our own markets. And, when I say learn, I mean learn a lot. Those who are not there now are missing out on a large part of what the sector will be in the future.

China Netcom is the official telecommunications operator of the Olympic Games and this is another reason to be proud to be one of their partners, because it is an historic event that China hopes to make the most of in every sense and which will see the blossoming of what China represents and will continue to represent for the rest of the world. In addition, Telefonica was the official telecommunications operator at the 1992 Barcelona Olympic Games here in Spain, and we are making available to China Netcom all that we can provide to make the event as much a success as possible.

What does China need to know and keep in mind both about Spain and, more specifically, about Telefonica?

César Alierta and China Netcom representative

and need: a company that has formerly been a monopoly and which has undergone privatisation, and which has gone beyond its border into growth markets in a successful way.

worldwide and Spain has strong historical, cultural and economic links not only with the EU but also with Latin America and the Hispanic world, so if China does wish to go beyond its own borders, Spain the natural choice of gateway between these two worlds: the EU and Latin America.

We are interested in China given the growing presence and interest that we see in the nation in Latin America, and also have seen how our proposal fit in with the needs of both the Chinese authorities and the operators.

Chinese economic activity in Latin America has multiplied by a factor of seven in the last seven years, the balances of payments in Latin America can no longer be understood without the Chinese influence and, for China, understanding Latin America is vital because they have recognised it as being on the strategic points where they would like to be most connected. If they wish to guarantee the future growth of the Chinese economy, they need raw materials and infrastructure has to be built for those raw materials to flow towards the Chinese economy and, as a result, they will have to strengthen their links with Latin America. To count on Spanish businesses and institutions that have 500 years of historical links to Latin America, positions Spain and Spanish companies as privileged partners for China's interests.

I believe Telefonica has a lot to offer China and can also learn a lot from it, because I am convinced that those companies which are not present in the Chinese market now will miss out on an important part of the future of telecommunications, even if this is only a proving ground for experience.

Spain's image in China Spain, in a country with a population of just 45 million, is the seventh largest economy in the world and that may attract the attention of the Chinese: how can such a small country in comparison with their own, because such an important economic force in the world? Apart from the historical and cultural factors, Spain also boasts an impressive business and economic dynamic from the private sector. Spanish is the second most widely spoken language

Telefonica's strategy for China An operator that wishes to be a global player in the telecommunications world has to be in China.

8

When we came to China in 2004, from the first moment when we met with the Chinese authorities we realised that that had done their research and had pre-selected us as partners and, as a result, that they already knew about Telefonica and also Spain. However, naturally, that vision is not shared by all and, when it comes to building an image for Spain, we have to take into account that the Chinese respect cultures with a long tradition and Spain has that.

In China we can offer something that very few nations are able to do, which is to serve as ambassadors for them in two worlds, the EU and Latin America.

Latin America is strategically important for China and is also a market that has its peculiarities and in which you have to understand the mentality, the markets, the partners, the clients, the products, the distribution channels and the language... We can act as promoters for Chinese interests in Latin America.

On the board of China Netcom, on an operational level, we are very comfortable, we are treated very well, they are very receptive and open... Of course, we need to keep moving forward and everything can be improved, but if you were to ask me two years ago if I could imagine the situation we are in now, I would have said no, because I thought things would move more slowly and with far less transparency.

We can offer the Chinese authorities, Chinese businesses and the society of China as a whole a world of opportunities and Telefonica is the proof of that. Our experience in China could not have been better.

SPANISH GIANTS

ENGINEERING & CONSTRUCTION

Juan Lladó Arburúa Executive Vice President Técnicas Reunidas www.tecnicasreunidas.es www.fundeschina.com Técnicas Reunidas is one of the first engineering and construction firms to be established in China, it has undertaken landmark projects in different fields such as refineries, petrochemical plants and the iron and steel industries. It has collaboration agreements with the most important trading companies in the market (CNITC) and provides engineering and construction services to companies like SINOPEC both within China's territory as well as overseas.

A real success story: Técnicas Reunidas has been working in China for more than 20 years We began to travel to China at the start of the '80s. At that time, China was nothing like the country we know now: it needed massive industrial development, it need to develop its petrochemicals, and that was the kind of know-how we had and which we had applied in Spain, in Latin America and in North Africa as well as in many other places around the world.

It took some time for us to understand exactly what our clients wanted and to work out how we could provide that, but once we won their confidence and they ours, a long and fruitful relationship began that has lasted until the present day. Since the first time we arrived in the country, we have never left.

had to get to know us well: they came here often, we invested a lot of money to bring them to Spain on many occasions and showed them all of the facilities we had built, but the Chinese also had to take a risk, because back in the '80s we were much less of a brand as a company than we have today and, above all, much less of a reputation than our Anglo-Saxon, French and Japanese competitors and, as a result, our Chinese clients also had to undertake some risk when choosing Técnicas Reunidas.

In the '90s, when all the Spanish companies were investing in Latin America, we were asked: 'Why are you not investing in Latin America?' And we replied that we were much more comfortable and exposed to less risk when designing, building and providing services in China than in other nations where, in principle, it may have seemed more simple for Spanish companies.

The plants we build and operate are much more complex and are designed by us from the very first foundations. In our case, we have to highlight the enormous amount of know-how we put into everything we do. At the moment, there's a lot of investment and we are building refineries all around the world, and so are coming to realise that there are not that many companies like Técnicas Reunidas. Competition is hard to set up in three years, because being able to design a plant for a Chinese client, possibly with Chinese partners, in projects where more than 500 engineers are required is not only not a easy task, but, in fact, is a very tall order.

We were more competitive in China than elsewhere in the world, because we set lower prices when we made offers there. We considered that was the strategy with the least risk because we had more reliable clients there.

Ours is a complex business and, as a result, requires know-how, technology, training for the engineers, the development of design processes and capabilities, and these are all aspects which Técnicas Reunidas takes very seriously.

A safe bet...

Today we are a much bigger company and, I also believe, we have it easier. Spain has now become quite a brand and a quality brand at that. On that is different from our competitors: a brand based on the global capacity of our banks and our energy companies and, thanks to which, Spain is beginning to develop a quality brand on an international scale.

For us, a service provider that designs and build petrochemical plants around the world, to be able to design and build them in China was, without a doubt, an important reference in Técnicas Reunidas' portfolio of projects, but we would never have been able to imagine that we would receive the kind of approval that we have.

That also meant that, in difficult times in which we worked less due to less than optimum situations – either because clients were not investing, or because they had decided to invest in other products – we stuck to our decision, which has certainly proven to be right, not to abandon the market. We have never left it and will never do so in the future.

How would you describe the profile of your clients in the framework of the projects you have carried out in China to date?

Our clients are Chinese petrochemical and oil firms who nobody used to know and who, today, occupy the leading positions among petrochemical and oil firms around the world in terms of size, sales, profits and billing.

Today, Chinese oil companies are considered to be among the ten largest worldwide, such as Sinopec, PetroChina and CNOC – the China National Oil Corporation.

What do you think your clients in China took into account when they decided to work with Técnicas Reunidas?

At that time, we had already design and built a high percentage of the refineries and petrochemicals plants in Spain, had begun to set up in Latin America and had garnered some important successes in Indonesia, but the Chinese still

the means to subsequently win new contracts around the world. If Técnicas Reunidas has designed, built and begun operations in all these projects in China, why are we not going to be able to do it in Saudi Arabia, in Turkey or in Egypt? By this I mean that our experience in China has, without doubt, proven to be useful whenever we launch projects in other countries worldwide.

Today, how many projects has Técnicas Reunidas undertaken in China?

Around 15, including petrochemicals, refineries, steel, paper and chemicals plants. In some of these projects, we worked with local Chinese companies as partners, and in others with Japanese partners.

That was the case when our work complemented that of another company in the design, or the construction, or the purchase of equipment in order to have access to other markets.

What are your expectations of the market today?

China is an economic power which is on its way to also becoming a worldwide technological power, so China for us is not just a market but also the companies with which we will collaborate in the future on projects in other countries.

In fact, we are already working with Chinese companies in Saudi Arabia, where we are building very large gas and refinery units with them there. Chinese businesses are starting to have a very significant presence in the rest of the world and we have Chinese partners with whom we work in other nations.

Técnicas Reunidas is a technology company, with a lot of international credibility and lots of know-how. We have plenty of vision and global experience and are a solid company both from a technological and a financial point of view, with a significant presence in Asia, the Middle East, Africa and Latin America.

As a Spanish product, both as a company and a country, we have to get to a point at which, being only 0.5% cheaper than our competitors, we win the tender for a project. Lest it be that we have to lower our prices because of the lack of a strong brand.

Having the technology and a brand is what permits you to have greater margins and, if you have larger margins you earn more money which, in turn, enables you to reinvest that income in more know-how and technology.

At present, our clients do not only provide us with projects but also ask us to provide training courses in the design and management of projects and ask us to do the same together with them outside of China. Which is to say that all of this is a sign that both Spain and Técnicas Reunidas have a lot more of a reputation that we did before. We are no longer unknown quantities to the, neither as a company or as a country, and that simply was not the case 20 years ago.

One imagines that the success Técnicas Reunidas has had in China would also have opened the door to the rest of Asia?

Both to the rest of Asia and to the rest of the world.

China bet on Técnicas Reunidas in the same way as we bet on China. The references of the projects that we have carried out in China have provided us with

9

Fundación Consejo España-China (Spain-China Council Foundation) The Spain-China Foundation Council was founded in 2003, as a homologue of foundations for Japan, the United States and Russia.

It is financed by the private sector, with institutional backing from the government.

The Secretariat is in the Ministry of Foreign Affairs, enabling members to be close to government, council it on issues in bilateral relations, and get involved in political issues, beyond economics, to promote cultural, sporting and academic relations.

We want to stress the long-term importance of all aspects of Sino-Hispanic relations. The business world is very important: if large investments are made and trade increases, everything else moves too. But we cannot forget cultural relations are crucial too, as are sporting ones, and academic exchange is also vital: the best diplomats are the students that go from one country to another.

The Foundation covers a range of issues and,

every year, organises the Spain-China forum, last held in November 2007 in Madrid. The Forum keeps the flame of communication and cooperation alight and stimulates activities contributing to mutual understanding and bilateral relations.

As President of the Spain-China Foundation Council, I have great satisfaction seeing the number of activities we undertake every year.

SPANISH GIANTS

CORPORATIONS

José María Aldecoa President Mondragón Corporation www.mondragoncorporation.com

Mondragón Corporation is a company made up of nearly 100,000 people and with a history going back over 52 years that has developed through collaboration. Its very nature means it seeks to create long-term collaborations and to be good partners to build businesses both in China and elsewhere in the world.

Introduction to the activities of Corporación Mondragón today.

Mondragón is a group of companies founded in 1956 that carries out activities in four principal areas: finance, industry, distribution and knowledge.

The financial arm encompasses banking, pensions and insurance, and includes Caja Laboral and Lagun Aro. The industrial arm is made up of more than 150 companies which are grouped and coordinated in 12 divisions and whose activities are concentrated in such sectors as consumer goods, domestic appliances, bicycles, equipment – toolmaking machines, presses and cutting lines – industrial components for the automotive and aeronautical sectors, construction and business services.

centres dedicated to research in specific areas.

At the present time, the group is made up of 260 companies and bodies. At the end of 2007, sales reached 15 billion Euros, representing growth of 12% as compared to 2006, of which 7.17 billion came from the industrial area. Of this total, 4.1 billion came from international sales.

What is the scope of Mondragón around the world today?

Mondragón has always looked to global markets throughout its history. At the end of 2007, international sales from our industrial arm were more than four billion Euros, 57% of overall sales in that area.

As regards our installations overseas, at the end of the last fiscal year, we had 69 working factories and we will reach close to 75 by the end of 2008, with six of these in an advanced state of construction.

In the distribution arm, our basic interests are hypermarkets and supermarkets in the Eroski group, together with other businesses linked to the foodstuffs sector.

In terms of geographic proximity, we began to expand into the European market in the 1970s, but had also already begun to explore the American and Asian markets in the 1980s.

And in the field of knowledge, we have our own university, The University of Mondragón, established in 1997, where some 4,000 students are taking degree courses at present. Mondragón also has various research and development

In Asia, we started with the semiconductor business, which led us to open a branch of Fagor Electrónica in Hong Kong in 1984 and a production facility in Thailand in 1990 as our first activities in the continent.

Europe continues to be the region where we have the largest number of installations. Of the 69 plants we currently operate, 36 are in Europe, which is to say practically half of them: 5 in France, 4 in Germany, 4 in Italy, 2 in the United Kingdom, 2 in Portugal, 7 in Poland, 2 in Slovakia, 8 in the Czech Republic and 2 in Romania.

We have 15 plants in the Americas: 7 in Mexico, 6 in Brazil and 2 in the United States.

In Asia we already have 12 plants, including that first one we opened in Thailand, more than 10 in China and one in India.

And, finally, in Africa we also have three plants: 2 in Morocco and one in South Africa.

You became aware of the tremendous potential of the Asian market in the 1990s?

Yes, we already had the vision in the 1980s that Asia, and China in particular, would be a region of massive future development. So, in 1984, we opened a branch there. In fact, we set up a company that had its own stock and manufactured from Hong Kong, which enabled us to be active in Japan, Korea, Taiwan, Malaysia and Thailand, as well as in Hong Kong itself, and from which we began to undertake our initial business in China.

Once Fagor Electrónica was in place, Fagor Automation followed and it has now been nine years since the plant in China was set up, the first of those built there to make CNCs. At the moment, as well as Fagor, other companies in the group also have a presence in China, including: Irizar, Copreci, Batz, Danobat, Orkli, Eika, Orbea, Wingroup and Bexen. We started in Hong Kong and, from the '90s on, expanded to both Beijing and Shanghai.

What does China mean for Mondragón today?

An ever-expanding share of our material purchases, such as moulds, templates, components and commodities, are carried out in China. To do so, we have an office in Shanghai staffed by 18 people and other offices for procurement and sales in Beijing, Hong Kong, Nainjing, Shenzhen, Jonking and Guangzhou.

Among the six plants that we are going to open this year around the world, four of these are in China, so that by the end of 2008, we should have 14 plants in operation there.

I believe that this is a telling detail in trying to understand the importance that China has for us and in how we are growing in a significant way there. We do not see China simply as a market to buy from or one in which to produce to sell to Europe, but rather as a market in which we would like to be in order to sell there, to set up and to remain in a stable fashion.

In fact, we have already begun conversations with some Chinese companies. While we have not signed any specific agreements to date, we have already been speaking about creating joint-ventures and building alliances in the long term with Chinese partners.

We do not enter a country to simply exploit an opportunity and then move on to another country which costs even less. Wherever we go, our objective is always to develop companies in the long term and, through them, to also positively affect values and education, actively contributing to the development of the society in which we decide to operate and that is our desire in China too.

As we needed critical mass in order to do this, we decided to concentrate the companies we have in China in one place, and inaugurated the first industrial park in Kunshan, 40 kilometres from Shanghai, which means that, taking all of them into account, we have a total presence which is larger than the size of any one company and, in this way, can have some effect on the environment in which we operate, even though it may be modest and low-key.

On one hand, we contribute to improving the development in the area and, on the other, we capitalise on the synergies and experience that result when various medium-sized companies decide to work together for the exchange of people, the transfer of understanding and the sharing of common areas that provide benefits for us as a company. By 2010, we expect to have invested 100 million Euros in the park which, by that time, will have around 3,000 employees.

How would you define the keys to your success, the foundations upon which Mondragón competes on a global level?

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We started out 52 years ago under the umbrella of a little professional school and a small appliances workshop in Mondragón, and today are the number-one business group in the Basque Country in terms of turnover, seventh in the ranking of Spanish companies and are among the top 80 groups in Europe. I would have to call this development, which began with nothing, a success without a doubt.

The fact that we reinvest all of our profits is worth pointing out too, and so we are able to keep growing and, at the same time, be a solid company which can deal with times of crisis more easily, and there have certainly been some of those during the last 52 years.

There's also an important issue which is worth mentioning about China: behind the concept of a cooperative, in many nations there is a completely different reality to our own. In our case, the concept of a cooperative is nothing more than a legal means to enable us to achieve an organisation of people who share a common project and who have a wholly pragmatic and businesslike approach.

Another element that should be underscored is that, as we are a multi-business and multi-activity corporation, the elements of cooperation between one business and another, the creation of shared funds and resources that provide support to expand a unit which, at a given time, may be strategically interesting for development even though it may not have sufficient resources, or to shore up one that may be undergoing a crisis, creates a win-win relationship in which everyone comes out on top and which strengthens all the parties involved.

And, finally, training and knowledge. We have our own university, which we manage and which serves society as a whole, and we have more than 12 technological centres that form a connection between education in the university and the application of knowledge acquired as an added value for the company.

In conclusion, we are the largest industrial cooperative in Europe; have signed joint-ventures with foreign companies and brought technology to Spain and are looking for European and American technology partners; and have 50% shares in companies and, as a result, know about collaboration and alliances, whether that be to set up companies with others or to exchange technology and knowledge about the country; all of which is of the utmost importance to us.

What should China know and bear in mind about Spain and, specifically, about Corporación Mondragón?

Chinese businesspeople should know that Spain is a nation fully integrated into the European Union and very well positioned on an international level. Spain has a very high level technologically, great economic indicators and good international relations.

Furthermore, due to geographical and historical reasons, Spain has very good connections with the north of Africa, Mediterranean countries and, above all, with Central and South America. As a result, Spain is a magnificent place from which to establish relationships with other nations and also to set up and enter the rest of the European market.

As regards Mondragón, we are a company made up of almost 100,000 people, have 52 years of history, have made our own fortunes and have developed through collaboration. Our very nature means we look for long-term collaborations and we are good partners to do business in China and elsewhere around the world.

Mondragón Corporate Office in Beijing: Room 926, Golden Land Building, 32 Liang Ma Qiao Road, 100016, Beijing P.R.China Tel.: (+86 10) 64643681-5 Fax: (+86 10) 64643680 E-mail: mccbj@mcc-china.com

SPANISH GIANTS

CORPORATIONS

Introduction to Corporación Albatros Corporación Albatros has its origins in 1920, when it was founded by my great-grandfather and it was basically a mechanical company.

Today, we are dedicated to the design, manufacture, marketing and maintenance of railway vehicles and, for the last five years, have concentrated on the design and construction of train equipment devoted to passenger comfort and security on trains, specifically in the field of on-boards electronics and communications.

Nicolás Fúster President Eusebio Toral Presidential Adviser Albatros Corporation www.albatros-sl.es

Corporación Albatros is made up of various engineering and production units in Spain as well as branches and agents spread around the world. We have a workforce in excess of 700 people and turn over more than 120 million Euros a year, mainly in overseas markets.

Corporación Albatros is known worldwide as a systems integrator for on-board and control systems for trains, both within the train itself and from a centralised remote location. Their equipment is in service in trains which are running on some the largest long-distance and urban railways networks around the world.

We have more than 20,000 static power converters, 18,000 information systems and a wealth of modular indoor and outdoor designs installed in the leading rail, metro and tram networks around the world.

For us, China has two very interesting aspects: on one hand, as a supplier of component equipment which is labour intensive, because it is obvious that China is a low-cost producer and, on the other hand, it is also a market with spectacular prospects for development, which is why we are ideally looking for a partner with whom we can do both things.

This strength in electronics enables us to drive forward a radical sales strategy in all of the electronic components found in a train and, in this sense, China would be our 'ideal partner' for the implementation of this sales strategy for the electronics we produce, to which all of the mechanical parts found in trains could be added.

In China, we are looking for partners in three different categories: the first to integrate with a Chinese supplier of mechanical parts – for example, manufacturers of small transformers which we could help grow until they were able to handle the global supply of on-board products; the second to create an alliance with a company that makes a single on-board product and, as a result, expand to the full range of on-board products – always taking into account that we provide all of the electronics and communications structures; and the third, a partner who could be any one of the Chinese railway manufacturers, to whom we would provide all of the modules necessary for the

Today, trains are much more than a simple means of transport. At the present time, people want comfort, security, punctuality and so on, and all of this is achievable with the latest electronics and preventative maintenance. We provide a solution for that need in Europe, thanks to integrated electronics which communicate all of the devices and components in the train both on the inside and the outside.

We provide our systems with a kind of intelligence that manages any alarms and any type of event that endangers the train itself as well as the passengers, and which automatically sends a signal to the security forces and, also, which can be sent to the operator who is physically closest to the location where the incident is taking place.

All this is latest generation technology and if we are then able to add the latest mechanical manufacturing to this too...

We have created a single system in which hundreds of communications and hundreds of software processes work together. This is valuable know-how which is constantly evolving because it is vital that this should always be as up-to-date as possible.

Which is not to say that all of the mechanical work will be done in China with our strategy, but that a combination of know-how exchange will be necessary, there will be work for all concerned, there will be a mechanical part that inevitably will need to be done in Europe and an electronics part of the process that obviously will be done in China. There is an ideal arrangement to be worked out, and a Chinese partner will be the cherry on the cake that this project needs.

And you are perhaps also the cherry on the cake that your future partner in China has been waiting for...

Exactly. We have to find one another in order to work together, to expand and globalise this project.

Until now, the team in our office in China has focused more on the role of China as a supplier than on that of China being a potential strategically.

internal fitting out of trains: the complete interior, including air conditioning, video screens for entertainment, doors, etc.

What expectations do you have once you find the perfect partner you are looking for in China?

A partnership with prospective candidates in these three areas would be a 'marriage made in heaven'.

The railway is a very important form of transport in China, given the enormous extension of the country as well as the fact that we are talking about a population in excess of 1.3 billion inhabitants, which is undergoing obvious demographic movement and concentrating in large urban centres of more than 10 million residents.

Apart from our offices in New York in the USA, London in the UK and Sao Paulo in Brazil, we also have an office in Shanghai that we opened last year with the intention of providing support for our services and solutions to our clients across Asia.

This office will lead to a production centre which will increase our competitiveness and enable us to dynamise our sales activity in China.

At present, we have five people working there who are selecting the products which will be clearly advantageous for us to produce in China, for example all those products which are made in large runs and which are labour intensive. But, at the same time, they are also trying to find potential suppliers, or producers of on-board products, and even train manufacturers with whom we may be able to reach an agreement, which is our primary objective.

This creates impressive mass transportation needs, much more than anywhere else in the world, because so many people need to be moved. These needs are being met in part because China is making an extraordinary

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effort, has more projects underlay per metre squared than any other nation on the planet and will have to do the same thing all over again with its local train networks.

This means that the development of the railways, above all when associated with mass transportation, is truly spectacular and will still continue to grow at a very fast rate for the next few years and, probably, will do so uninterrupted and, as a result, you just cannot turn your back on this market.

In addition, all of the cities with more than two million inhabitants theoretically need a metro system in order to get in and out of the city to work and so the potential for development is simply astounding.

As well as your know-how, the spectacular portfolio of projects you have undertaken on an international scale and your intention to associate with a Chinese company, what else can Corporación Albatros offer the Asian giant?

Starting out in China demands you have the capacity, the size and the means to enter this market, and we have all of that. Our company has 88 years of history and our methods for starting up in a new market is, and has always been, exemplary.

We have experience and know-how, we enjoy a certain

prestige and credibility on the international stage, and we want to establish win-win business relationships in the long term. Because of this we are completely in harmony with the Chinese concept of 'guanxi'.

This exemplary conduct of ours comes from the fact that, as well as being a multinational, we were also a family-owned company at our inception and which is now in the fourth generation of doing business and that can only be maintained if you have a type of conduct and achievements that are demonstrated throughout many years of history.

More than two-thirds of our turnover comes from exports and our products are sold in the most advanced countries around the world, above all in the United States and in the European Union.

We are always at the forefront of technology, we have been recording annual growth rates of 20% and have carried out very significant projects on an international scale. Now our priority is centred on the Far East. It is another big step forward in our global development plans.

As a Spanish multinational company, while the image Spain has in China may not have been as high-profile as that of other European nations, we do have the advantage that we are offering a highly differentiated product: holistic or integrated electronics and maintenance of the full range of mechanical equipment.

You also have to take into account that, in Spain, the railways have undergone spectacular development over the last few years. The projects we have showcase in Spain in terms of railways – both in high-speed links and mass transportation, such as metro systems – are leading the world. We are specialists in railway technology and offer the latest on-board electronics.

In China, we are looking for the ideal partner to complete the range of our on-board products and to undertake joint projects in the long term, continuing with our international expansion and with the guarantee and know-how that a company which has been around for 88 years can offer and which we are now making available to China. As a result, we are not just passing through, we're here to stay in China.

EXECUTIVE EDUCATION

SPAIN FROM A BUSINESS PERSPECTIVE around the world and on many other fronts: not only in our focus on the spirit of enterprise in the creation of new businesses, but also in the development of family owned companies.

Santiago Iniguez de Onzoño Dean IE Business School www.ie.edu

We are also well-regarded by the academic world and by analysts in the sector of leadership training, in everything that has to do with the development of management and teamwork skills, so that on its own terms IE is attractive to those people who have a clear entrepreneurial profile and who are interested in the global business world. The typical profile of our students is not that of a traditional or conventional person, but rather those with the desire to change the fabric of business around themselves.

Recognized as one of the best business schools in the world, IE Business School brings together students from more than 70 countries at its city campus to follow its Masters, Executive and Doctorate programmes.

Introduction to IE Business School IE Business School is an innovative, dynamic and independent school, which is in the process of setting up its university and is consistently considered to be one of the best schools in Europe and around the world.

“In China, we are carrying out major collaborations with the most prestigious academic institutions, have a growing number of graduates and alumni who are directing operations in European and American companies in China, possess representative offices in Beijing and Shanghai and, by this June, will be announcing the opening our own university in China” We are a school that offers Masters programmes which are somewhat different, both in generic programmes such as the MBA and Executive MBA and in programmes designed for specific functions such as the Masters in finance and the Masters in marketing, and we also provide these using different formats, be these presential or blended education, which combines on-line methodology with presential practices.

All of them are high quality programmes and, in fact, IE's on-line programmes have recently been rated by The Economic Intelligence Unit as the second best in the world.

We also offer programmes adapted specifically to the needs of organizations, and have a very active training division for personalised programmes which also counts on the leading European companies and those from other areas around the world as its corporate clients.

We are a global school, with an international presence, and with more than 100 different nationalities on our campus, with a very solid body of professors both from an academic point of view and in term of the perspective of their dialogue with upper management in the majority of companies around the world, and we also have a collective of alumni who are located on all of the continents and who remain very involved with the institution.

Competitive advantages of Spain to be highlighted in China?

In just 30 years, Spain has gone from being an autarchic and closed economy to become an open nation that actively invests overseas: Spain is the

number of women who sign up for our Masters is one of the highest in the world. As a result, IE is perhaps the best place to be educated in order to occupy posts of responsibility in international management, especially in comparison with other business schools, such as those in the United States, where diversity is much less common.

Positioning and plans of IE as regards this Asian giant?

Businesspeople, who are those who always best foresee what is going to happen in the field of international relations, were well aware of the spectacular transformation of China about a decade ago, firstly on an internal level and

What are the characteristics that make IE's programmes different?

They add value to what a traditional MBA offers. The supervision of students in the programme is very closely followed and very personal. We try to understand the needs of each and every one of our participants and provide an educational offer which is relatively wide within each of the programmes, with an important share of elective courses.

IE has a series of differentiating traits which mean that people who come to do an MBA at our school have previously made a series of firm decisions: for example, we place a lot of emphasis on the creation of businesses. In this sense, we are considered as one of the references in schools

leading investor in Latin America, at the present time Spanish companies also represent the leading investment group in Eastern European countries, and we are also coming closer to the markets of Asia by way of China and India.

In this model of development and transformation of a closed and regulated economy to a free and competitive one, many Chinese companies and organisations and Chinese managers may find points of reference or examples which offer them something to transform their own economy too.

Therefore, learning about what a transition economy is from a legal and cultural point of view and in terms of the transformation of management practices is clearly another of the added values that they will be able to find in present-day Spain.

It is true that Spanish companies have taken more time that those from other European countries to enter China, but the same thing happened in Latin America and Spain is now in the first place in the rankings in terms of direct investment. So, in Asia, or more specifically in China, this could well take place again. Spanish companies are very dynamic and develop very quickly as soon as they move into an overseas market.

China is investing very actively in Latin America, and trade between the two blocks is likely to increase greatly over the next few years, but there is also a whole series of possibilities to develop an exchange in the field of cultural projects and services which could, in turn, become a focus of business in the years to come.

In this sense, Spain is a magnificent platform from which to establish relations both with Europe and Latin America and, as a result, act as a catalyst to explore opportunities on both continents. There are two other gateways which could potentially be open too: the region of the Middle East – as Spain enjoys excellent relations with the Arab nations and, as such, could also serve as a means to connect to these countries – and, of course, Africa, the continent which lies off our border and from which Spain can also serve as a bridge. Because of all this, we are in a privileged geo-strategic position.

And what about IE itself?

At IE we offer a truly diverse environment, we have students from many nations and different cultural traditions as well as one of the highest percentages in terms of gender diversity: the

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then in terms of its relationship with the world.

China will become the world's leading economic power within the next 20 years, and perhaps even the next 15. This means it is absolutely necessary for us to understand the keys to a very diverse country, with many markets and different cultural traditions.

At IE, we have introduced specific sessions in all of our MBA subjects which are devoted to dealing with case studies of Chinese companies, whether the discussion in question be on accounting, marketing, strategy or organisational behaviour.

We have adopted this tactic with the goal of making sure our students are conscious that China will become the most important nation in the world and, as a result, they need to know about the business environment there.

We are also beginning to attract Chinese students as well as developing activities, seminars and modules for our MBAs in Beijing, Shanghai and Hong Kong. We have exchange programmes and strategic agreements in place with schools like CEIBS, Tsinghua, Cheung Kong, Fudan, and the Hong Kong University of Sciences and Technology.

Furthermore, with Fudan specifically – who are possibly our most important strategic partner in China – we have already held two editions of a programme aimed at European managers who are interested in developing business in China and also plan to augment these activities. But we have also acted in the other sense: we have welcomed more than 30 Chinese CEOs and managers to Spain, in collaboration with Cheung Kong, with the aim of exploring business opportunities in Spain and in Europe.

Therefore, in China, we are carrying out major collaborations with the most prestigious academic institutions in the management field, have a growing number of graduates and alumni who are directing operations in European and American companies in China, have had representative offices in Beijing and Shanghai for the last four years and, by this June, will be announcing the opening our own university in China, which is a completely innovative event because it is the first time that a business school will be creating its own university, as the opposite is normally the case.

China is destined to lead the world in the very near future and we are and will be there to add the maximum value possible to that process.

EXECUTIVE EDUCATION

SPAIN FROM A BUSINESS PERSPECTIVE

Carlos Losada General Manager ESADE Business School www.esade.edu

In 2008, ESADE celebrates its 50th anniversary as an institution that enjoys massive international recognition due to the excellent education it provides to professionals in the business and legal worlds from its campuses in Barcelona, Madrid and Buenos Aires.

What does the word 'China' mean to you?

China has become one of the major economic forces worldwide and has also 'arrived to stay.'

This means that it has become a primary target for the best business schools in the world and that more and more MBA students and managers want to know more about the Asian giant and understand one of the most powerful economies in the world in more detail.

For a business school like ESADE, with a clear global vocation, China has become a priority and, in fact, it has been eight years now since we began to establish relations with the leading Chinese universities and business schools, with the goal of being present in different areas of the Chinese reality.

At one time, we worked together with CEIBS during their implementation process, sending professors there to give classes, and more

than of a single bloc, because there are so many Asian markets and they are so important that it is impossible to generalise about a geographical area which is so extensive, powerful and diverse from an economic point of view.

ESADE is known for always having been in touch with the needs of professionals and of businesses by means of the enormous research efforts that we carry out to ensure we are always up-to-date, from a critical perspective, with everything that is going on in the field of management development. I believe that this combination of research and education is very positive and, without a doubt, one of the most attractive differentiating factors our school offers. As a result, we will be continuing to extend our research and exploring all the aspects that businesspeople believe to be most relevant in both communities, in terms of the opportunities that may be most of interest to the Spanish business community in China and vice versa.

Which issues about China provoke the most interest in Spanish businesspeople and managers?

recently we have signed agreements to collaborate with the Fudan University in Shanghai and the Tsinghua University in Beijing – in some cases via an exchange of students on the Executive MBA programme and, in others, where we directly carry out training programmes – as is the case with the university in Beijing, where we offer the “BIMBA” -- Beijing International MBA – programme which is being undertaken through a consortium of schools led by Fordham University of New York.

Our idea is to continue expanding our collaborations not only in fields like training and exchanges, but also promoting programmes which are increasingly being created like the l China Executive Leadership Program, more devoted to issues of studies and research – areas in which ESADE is specialised and which we consider to be very important – through which what we hope to do is to to bring the European and Chinese business communities closer and enable greater understanding.

ESADE has undergone a major international expansion over the last few years, driven principally by its management. Will you be placing the same emphasis on ESADE's expansion into the Asian continent?

Over the last few years we have been working very hard to roll out and consolidate ESADE as a brand on a global scale. We are very satisfied with the objectives we've achieved but believe there is still a long way for us to go. Our goal is to see ESADE consolidated as a global brand in the Asian market also, in which our presence began to become relevant already in 2002 when we started to receive a growing number of Asian students, not only from China but also from India.

Every year we are present in the leading events which are held throughout the Asian continent and do so in collaboration with business schools in Singapore, Tokyo, Delhi, Beijing, Shanghai and in practically of the the major Asian cities, recruiting the best professors and reinforcing the presence of our brand in this market.

When you talk about Asia, I think it is more correct to talk about specific countries rather

An important issue and one in which ESADE can also offer a lot is in the study of the processes of internationalisation of companies. We have an observatory – belonging to a Spanish multinational – which is devoted to understand the reasons behind the process of internationalisation and the real-world problems that companies go through once they being to internationalise.

and in Barcelona and location, without a doubt, is an indirect influence on the criteria students take into account when they are choosing a business school at which to undertake a course of study.

Some of our students come to study here with the preconceived plan of subsequently staying in Spain or in Europe, but the majority return to their country of origin at the end of their studies and what is really interesting is that they become the best possible agents of connectivity between two business communities.

Many Spanish and European international companies come to ESADE, as well as those that are undergoing the process of internationalisation, looking for Chinese graduates, or Indians, or those from other Asian nations, because they know about the training we offer, and are interested in hiring professionals from the nationalities of the countries where they are present or are planning to open offices or those into which they are expanding.

And the opposite also occurs: Asian companies, that know there are Asian students who are studying here, take an interest in them as potential managers who could work in the offices in Spain or in the rest of Europe.

Which possibilities about Spain would you highlight in China?

I believe that Spain is a nation that has enormous possibilities in China. We are talking about a market of more than 1.3 billion people, of whom, in terms of their purchasing power, 100 to 200 million are potential clients for many of the activities and products offered by Spanish companies.

I think there is enormous potential for possible exchanges and associations between the Chinese and Spanish business communities and, together, that they could expand and develop endless points of contact which would give rise to joint projects in which both parties could benefit greatly.

Spain is of the most vibrant economies in the European Union and has undergone a major transformation that has brought it, over the last decades, to a position of boasting the kind competitiveness which is key to the most advanced economies.

It's very interesting to analyse the 'whys' of some of these shared complications when you start to look into new markets. Normally, the process is essentially the same in all cases: first, you set up representative offices, be they your own or via joint ventures; then, you tend to establish a permanent presence in the country in question; and, finally, there is a major step, which is when whole components of the value chain are set up in the country and, then, you are not talking about a new market as much as about a new way of being able to compete in it: be it on costs, because of geographical proximity or due to any other factor, the primary objective is focused on responding directly to local and global needs.

For example, many companies set up in the United States because in some sectors behavioural changes in consumers were ahead of the Europeans in some way, and so they were able to measure this much more closely and predict what the major trends would be in the future.

Well, that is what some companies have done in advanced markets like the American one, and this is beginning to take place – for other reasons and increasingly so – in the Asian markets as well. This is not only to get a understanding of their peculiarities, but also but trends are also going to occur there which can then be extrapolated to other markets.

Internationalisation may appear to be a threat for the economy in the short term, but it offers a great opportunity in the long term and all of the business schools, chambers of commerce and Spain's economic fabric as a while have found a balance between threat and opportunity which has arisen in a natural way from the process of internationalisation of those companies that have clearly inclined themselves more toward opportunities than threats.

ESADE attracts foreign students from around the world who, as well as receiving an education, make the most of their experience to understand our nation better.

ESADE enjoys a pretty attractive position in that sense, because we are based both in Madrid

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“Asian companies come to ESADE in the knowledge that there are Asian students who are studying here, because they are interested in them as potential managers who can work in their offices in Spain or in the rest of Europe” Spain is not where it is today because of the cost of the workforce or its raw materials, but rather thanks to its capacity to innovate, because of the sophistication of its business model and services, due to high standards of infrastructure and communications and because its business fabric has reached very high levels of competitiveness on a global scale.

In the analysis of the Global Competitiveness Report which was published by the World Economic Forum in Davos, Spain's economy brings together a spectacular combination of competitive advantages, including the quality and talent of our human resources, which is one of the most attractive assets for overseas businesses which are setting up in Spain.

TRANSPORT AND LOGISTICS

SPAIN FROM A BUSINESS PERSPECTIVE

Introduction to ITS The ITS Group began commercial activities in 1989, operating in the field of distribution and transport of goods both on a national and international level. At the time, companies provided services that were not integrated: some were customs agents, others provided road transportation, others by air, still others by sea, and others yet warehoused goods... My idea was to unite all of those services in a single company which could offer clients everything they could ever need, integrated in one business.

From that time on, ITS has not only developed its activities in the area of multi-model freight traffic, but also, today, ITS is positioned among the leading companies in the

Aurelio Herranz GarcĂ­a President ITS www.itssa.es

In China, our major clients come from sectors like electro-medicine, like General Electric, air-conditioning and pharmaceutical laboratories as well as textile and footwear businesses.

ITS represents a new concept of transportation. It maintains a clear vocation for integral service in the area of advanced international logistics and There's no doubt that ITS' future is has a large and effective operational structure which offers flexible and looking very bright competitive service from anywhere in the world.

Our objective is to double our turnover in the

movement of goods belonging to our clients and, as such, for us communications and new technologies are absolutely necessary instruments to achieve our objectives.

The integration of our IT networks, as well as our extensive network of partners around the world, enable us to supervise the state of shipping at any time and let us react to any situation or incident in real time.

We are pioneers in IT projects and developments in the logistics sector, having developed, among other things, the leading software for the management of transportation, customs, warehousing and customs deposits.

sector in Spain, with an infrastructure able to undertake all kinds of logistics activities related to transportation, storage, distribution and customs.

We have a workforce of 300 professionals and our turnover exceeds 200 million Euros.

We have 16 offices around Spain and international branches in Argentina, Morocco and the United States.

As a service provider, the knowledge we have acquired over the last few years is basically the result of the efforts and know-how of our human resources, which have been able to combine progress and the application and utilisation of new technologies with customer care and personalised service. For us, logistics isn't just an economic activity, it's a process to create value.

mic growth that competition exists, and we are happy that our competitors are good as our job is simply to ensure that we are the best. To maintain the lead means you have to stay out in front of the pack, because, in our sector, clients take into account prices of course, but also other very important factors such as reliability, rigour, the quality of service provided and, above all, time.

We are specialists in the transportation of high-technology equipment and, as a result, take great care when transporting sensitive and high-value equipment, which deserve truly high-class logistics.

Our teams are specially qualified to handle and transport these kind of goods and we also manage the transportation, manipulation, location and installation of all kinds of machinery such as equipment for hospitals and industries.

All of these factors, and others, have meant that ITS has been chosen as the official logistics provider for the Expo 200 in Zaragoza. More than 100 countries will be represented at the Expo, invited by Spain's government, and will be present with their official delegations in pavilions, exhibitions, conferences and shows.

This achievement is an extraordinary stage for us and for our national and international reputation. It is a real highpoint in our history and reflects clearly our qualifications to offer advanced logistics management services internationally.

You first arrived in China in 2003 That's right. Even so, at present, we are the leading freight agents for China and are very well considered as a company. At that time, I was already convinced of China's enormous potential, just the same as I am now sure that in little less than a decade, China will have become the first or second global power in international trade, but now I also think I may have underestimated, because China is growing at a pace even higher than I had imagined and, in fact, ITS has also grown in China more than we could have foreseen.

Our first steps consisted in travelling there to set up a network of agents who could represent us at the different Chinese ports and airports to deal with the trade exchanges that there were at the time between China and Spain and we were very lucky: we found some very good agents, fantastic colleagues, and have grown spectacularly since we arrived in the country.

To give you more specific example of how happy we are, I would rate the relationships with our agents in China as nine out of ten, because there's no such thing as perfect. We have worked for years together and as Chinese and Spanish people understand one another perfectly. Even the obstacle of language is relatively simple to overcome, because when two companies know what they're doing and are good at it, they use the universal language of business and it's always easy to understand one another. What is important is sharing the same philosophy, the same ideas and, above all, the same goals.

In our sector, as you would expect, competition is fierce. I have a lot of respect for our competitors, not only in Spain but around the world. I think it is important for progress and econo-

On which values do you base the personalised service your offer clients?

We offer the most flexibility possible in pickup and delivery times, as well as in terms of the frequency of our services, according to the needs and demands of each client.

Our activity includes a range of integrated transportation services: import and export of air freight, marine container freight, landbased transportation in trucks, and distribution, offices and customs warehouses.

next five years. In China, we will grow more as the country offers many more possibilities: due to its enormous population, the speed at which its economy is growing and, above all, because of how well-qualified the workforce is there which has also improved significantly and is now much more focused on quality than it was a few years ago.

Furthermore, the Chinese government is working on a series of initiatives to bring companies into the interior of China to set up there and so avoid their concentration in only a few specific areas. As these measures are introduced, China's potential will only take off even more.

Albeit on a lesser scale, Spain has also undergone spectacular economic growth over the last decades and they are large Spanish companies which are ready to invest in China in a big way – as some are already doing – and also to cooperate and collaborate with Chinese partners in all those sectors where exchange can take place. At the moment, there are almost 500 Spanish companies present in China. That is a relatively small number if we compare if to the number of companies from other European nations that are also there, but what matters is the size of ambition and I believe that that number will grown considerably in the not-too-distant future.

At ITS, for example, we have definitely not ruled out the possibility of partnering with a Chinese company in our sector through a joint-venture, to strengthen our presence there.

We have 30,000 m2 of storage and also offer packing services, insurance, logistics, consignment of vessels and special installations.

If we have been able to position ourselves among the leaders in our sector in the years that we have been present in China, it's because we are a company that provides a guarantee of service. We respond reliably and rapidly to each and every one of our clients and have plenty of experience with customs issues: we know the legislation well, understand the steps that need to be taken, and are able to manage all of the licenses required both to export to China and to import things into Spain, so that our clients don't have to be bothered with going to see official bodies or to do anything at all, as we provide it all for them, and our network of agents is also all over China.

What are ITS' competitive advantages which make you different from the competition?

We are an advanced logistics management business, and the mission of our company is focused on the efficiency of response thanks to planning, implementation and efficient and effective control from the point of origin to the point of use.

We always try to stay ahead of the market's needs, and one of our most important differential advantages is the application of the latest technology throughout our service. ITS monitors traffic with 125 countries thanks to a network of agents in more than 500 offices, dealing with the international

ITS is in all of the Chinese ports and there wherever our clients need us to be

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PHARMACEUTICAL INDUSTRY

SPAIN FROM A BUSINESS PERSPECTIVE

Introduction to the establishment and activities of Grupo Covex Covex is a manufacturer of chemical and pharmaceutical products which was founded in 1977 and has clear international ambitions. At that time, I was the head of research of a large Spanish company which was ranked in third place among pharmaceutical companies and was specialised in alkaloids, which are products derived from plants for pharmacological uses.

At Covex, we are working with alkaloids on their applications for brain activity. The use of these products was a relatively young field in Spain, so the company began its activities as a manufacturer of raw materials in a relatively new sector, entering into the field of vincamine and its derivatives.

We work with products with natural origins, principally vincamine, vinburnine, vinpocetine and other derivatives.

We are the leading manufacturer worldwide of vincamine and work specifically with extracts of vinca minor, a beautiful violet-coloured flower which improves neurological and physical disorders such as the loss of memory, lack of concentration and attention span, dementia, sight deficiencies and depression. It is a relatively new product for pharmacological use, with only 30 years of market history.

This product is a molecule which we chemists know how to modify to make other compounds which are also found in nature.

Another of these is vinpocetine, which is a very curious molecule, with very low toxicity – almost none – which is used to combat cognitive degeneration and which we now sell to 56 countries around the world.

With time, in the same way that penicillin developed derivatives, vincamine has also evolved into other components which act upon a wide range of brain functions.

Cerebral biochemistry is very complex. We are finding new applications for different brain activities for this group of products every day: vincamine, for example, acts on the warning system as a vasodilator which heightens the senses, increases the flow of blood to the brain and improves oxygenation. This plant is used as a primary component in infusions to control nerves in older people who suffer from insomnia, anxiety and aggression.

Vinpocetine is a memory stimulator, as it facilitates cerebral metabolism by improving the flow of blood in the brain, increasing oxygen and glucose consumption in the neurones and the concentration of neurotransmitters involved in the memory process. It also aids in maintaining micro-circulation in vital organs, such as the ears and eyes, at a healthy state.

And vinburnine is a muscular oxygenator which acts in the liberation of oxygen from red blood cells. Its primary application as a dietary supplement is based on the improvement of glucose

metabolism within a muscle. Both athletes and anyone who undertakes exercise are able to obtain optimum performance by taking vinburnine as a catalyst for physical exercise.

At present, vinburnine is used with great success is

used by people between the ages of 40 and 50 and even by students.

Fernando Calvo President Covex Group www.covex.com

Together with one of our partners – the company Memory Secret – we have launched new products in the United States called “memo-coffee”, “memo-tea” y “memo-cola”, based on a patent we have in 150 countries, because we have discovered that caffeine, together with our product, produces a very interesting synergistic product. We will also be launching “memo-cao” in Ecuador using Ecuadorian cocoa, which is excellent.

Covex is a European manufacturer of high-quality pharmaceutical products and dietary and nutritional supplements, and a leader in the production of alkaloids derived from the periwinkle for memory enhancement.

In this way, instead of taking tablets which can “The market for functional food is undergoing massive development and the high quality of Covex's products is playing an important role in the new generation of food and drink. Our revolutionary technology is developing products able to improve intelligence, memory, strength and vitality, and we are open to establishing alliances with Chinese companies to develop products in the nutritional range for the functional foods market” the United States, because it has been proven that sports people at the highest levels of competition have muscular memory, just as babies do.

When babies repeat movements which are apparently unconnected, they are creating memories. In the same way that a student reads a text, memorises it and is able to reproduce it later, a similar thing occurs in the case of elite athletes. If we think of a gymnast, it is almost incredible that they can perform such high precision movements, but what vinburnine is able to do is fix memories in muscles.

Neurones, small factories for neurotransmitters, are the keys to the information about memory. So, elite athletes who take vinburnine do their training and their exercise routines with greater efficacy and learn sooner. This is an example of muscular or neuronal memory.

These molecules that we manufacture work specifically, in a very similar way to antibiotics: some are more active for the skin, others for the intestines, others for the lungs. And, from vincamine, more and more derivatives are being extracted, and it is possible that, one day, there may be one which facilitates, for example, the learning of languages, as they act on neurons by reinforcing the creation of compounds that are responsible for our cognitive skills: communication, the ability to learn, etc.

We are making intensive investments in research and development which, combined with the specifications of our products and highly qualified personnel, enable us to offer high-quality products at competitive prices all around the world.

As a result of these investments, at the present time Covex has more than 100 patents in over 100 countries, and is in a leading position in the supply of pure products manufactured to reach the highest levels of efficacy, quality and security.

The clients who consume our products are mainly older people who have noted different degrees of cerebral degeneration, from the loss of memory or cognitive function to senile dementia, which is a very serious condition, but in the United States our products are not being used as medication, but rather as a dietary supplement, because the FDA – the Food and Drugs Administration – has approved their use as a dietary product and they are

For example, we do not know why the Slavs have such an incredible ability for learning languages.

What does that surprising capacity of the Slavs to speak so many different languages depend on? Well, perhaps it is dependent on their neuronal structure. We also know that children, when learning languages, have to start as soon as possible, because once they are seven or eight years old they already have their cerebral confi-

guration fixed for one language, and it is very hard for them to change to another because their neurons are already configured.

So, products which are truly innovative and almost revolutionary...

15

be associated with having an illness, you have a memo-coffee or a memo-tea in the morning and you feel great. In America, there is a law for dietary supplements – which does not exist in Europe – which enables natural products that are completely non-toxic to be sold in the market for use as dietary supplements. As a result, our efforts are directed at the use of these products not only in pharmacies, but also for dietary reasons.

What presence does Covex have internationally?

Since its establishment, Covex has expanded into 56 countries, with the protection of more than 100 patents, creating subsidiaries and business relationships on a global level and offering the highest quality products to our clients. We have a really strong presence in eastern Europe, and in Asia we are present in Japan, Vietnam, Bangladesh, Pakistan, India and, of course, China, where we launched the first medication based on vinpocetine back in 1988. Thanks to the launch in China, we then launched in Russia which, today, still remains one of our most important export markets.

Our expansion has made us the largest manufacturer of vinca-derived alkaloids, and we have subsidiaries in Hungary, Poland, Portugal, Russia, Lithuania, Japan and, of course, in China.

Covex makes use of technology that enables us to prepare 140 intermediary products for the manufacture of medicines and dietary supplements.

INDUSTRY

SPAIN FROM A BUSINESS PERSPECTIVE

Amador Márquez President Bobitrans www.bobitrans.es

César Cañedo-Argüelles President Prointec www.prointec.es

Introduction to the activities and scope The fourth sector is industry, in which we have of Prointec placed a special emphasis on renewable energies like wind power, photovoltaic solar and other Prointec is the head of a business group founded in energy sources that are compatible with sustai1970, which is active in various sectors of enginee- nable development. Also, in this respect, Proinring, architecture and consultancy related to infras- tec has significant capacity and we are taking tructure, urban planning and the environment. part in projects in energy and in other industrial sectors in different countries, including the Today, Prointec is a multinational group with a United States, where we are providing support human resources team of 1,500 professionals and to companies in the development of the installation of photovoltaic energy plants.

“Bobitrans is basically dedicated to the development and manufacture of coils and transformers. We produce over 50 million transformer units annually, 80% destined for overseas markets.”

Introduction to Bobitrans Group

raw materials we were using for the production process were Asian in origin, and so Bobitrans is basically dedicated to the develop- bringing raw materials from Asia to transform ment and manufacture of coils and transformers. them here added up to an additional transport We produce over 50 million transformer units per cost for us and our intermediaries which was year, 80% destined for overseas markets. not viable, and so those were the principal catalysts in our focus turning towards Asia.

From the beginnings of the company in 1991, our activity has been the manufacture of Two years after Bobitrans entered China, my inductors in the form of coils and transfor- intention was to already have our own factory mers and, since then, the company has undergone constant evolution: we have focused on what can be called the inductive component – be it a coil or a transformer – and also added value step by step to our production process.

The fifth area, which is more horizontal in character, is construction management and engineering. Even thought Prointec is not a construction company per se, we provide engineering services to clients, to land owners and to public bodies to direct and supervise construction, carrying out quality control of work such as the fulfilment of programmes, budgets, and generally all of the engineering elements in the construction, in order to guarantee that projects are completed within the time frame and budget allotted and to the quality required.

We are now at the stage where, either we part produce a product for other clients, or we completely produce our own products, such as power sources for electronics in general.

How would you describe the competitive and differential advantages that Prointec has to offer?

a permanent presence in over 20 countries. We benefit from the professional knowledge of all of our teams in the fields of civil, industrial and environmental engineering, in architecture and in consultancy, in order to provide service to the public and private sectors.

Since the '90s, Spain has undergone strong development both in transportation and environmental infrastructure, a process in which Prointec has played an important role, has acquired lots of experience and has achieved major goals, especially in the sphere of high-speed rail networks.

How would you define the pillars of your success?

The most important differentiating value that Prointec has is our capacity to undertake integrated projects, given our multidisciplined professional abilities.

We have experienced professionals in civil, industrial, environmental and telecommunications engineering, and, as such, can undertake all of the different aspects of any project in all of its stages: from planning to exploitation and operation, by way of design, construction, conservation and maintenance. As a result, it is worth pointing out our service has an integral vision.

Without doubt, one of the most important factors in Bobitrans' success is our human resources.

We have a magnificent team of very young and very active professionals who have placed Bobitrans in the leading position the company occupies today.

For a company that wants to progress in a competitive environment such as the one we live in today, having a committed and enthusiastic team is vital.

On the other hand, Prointec's knowledge of the design of public-private financing models is also a very important asset, we are present in many projects of this kind not only in Spain but also in the United States, Mexico, Ireland, Portugal, Bolivia, Nicaragua, Panama, Brazil, Algeria, Morocco, Mozambique, Angola, and others and I believe this could be interesting and useful for Chinese companies who are looking for a partner and collaborator who can bring this knowledge and know-how to the deal.

Other keys to our success are the quality of our products, continued investments in research and development, the excellent service we provide and because we are a solid, serious company which benefits from the confidence of our clients, partners and suppliers.

In Spain, greater understanding of the models and projects of public-private participation (PPP) has also been developed and proof of this is that, of the ten largest concessionary groups in the world, six are Spanish: Prointec has participated actively in this concession model of public-private participation.

It's also worth highlighting our multinational character: apart from Spain, we are present in The knowledge we've acquired in these fields, not over 20 other countries on a permanent basis, only in Spain but also in America, Eastern Europe, which, in turn, opens up even more possibiliAfrica and, of course, Asia, position us as potential ties than those which I've already mentioned partners for Chinese companies for the development of that great nation, which is pushing Innovation and new technologies open the forward modernisation of its infrastructure, and to door for us in any country where we are incorporate public-private financing models, in present, and particularly in China, given that which we have plenty of experience and know- it has huge engineering firms with massive how, and which we want to make available to capacities undertaking railway, road building possible Chinese partners. and other projects.

How did the company's internationalisation process begin?

In sales, our internationalisation began in 1994, motivated basically by saturation of the Spanish market.

In Spain there was too much competition and no evaluation of quality, know-how and service by some domestic clients, which made us see that our market should not be limited by Spain's borders, but we should move into Europe in the first instance and, subsequently, to other continents.

In purchasing, we also saw our Asian competitors were very strong and that led us to go overseas to sell outside of Spain and look for new ways to compete on a global scale. To do so, we began to look for subcontractors and collaborators who would become part of our process in other parts of the world, as here was very costly. Some parts are now made elsewhere, for example in China, Morocco or South America and the end of the process is dealt with in Spain.

Experience which extends to other activi- What we can bring is the best technology being ties and aspects of your business used and which is offering the best results in the United States and in the European Union.

Depending on the professional specialisation, we develop our activities in the area of transportation, Spain is a leading country in fleet manageincluding engineering for infrastructure such as ment and in the use of satellite and positioroads, toll motorways, motorways, urban and ning systems in order to manage transport interurban railways, ports and airports. We also and freight rail networks. act as consultants for planning and logistics, with the incorporation of new technologies such as Challenges and objectives of Prointec in telematics and mobility.

China in the future?

What made you see that Asia, and more specifically China, was going to represent the market of the future and the present for Bobitrans?

We also work in the field of water resources We have drawn up a business and developand the environment. ment plan for the next three years, in which we forecast how we are going to grow, in Our third area of activity is centred on urban which sectors and in which geographical area engineering and architecture, in all that is and what our management strategy will be. concerned with the planning of towns and land. Urban engineering works, architecture It's a very ambitious plan that aims to duplicate and construction of public leisure and spor- Prointec's volume of business in three years, and in ting facilities and so on. this business plan, China is especially relevant because we believe that there are fantastic opporThe importance of the major capital cities, tunities ahead and so, at present, China is and in them the concentration of people and occupying the first place in our priorities. activities, is also the focus of activity for our engineers and architects. Prointec has renow- We can place the possibilities Prointec has to ned specialists and professionals to plan cities, offer at the disposal of potential technical and design their infrastructure and oversee the commercial partners in China, with whom we public and private building of urban spaces. could also work not only in the Asian giant itself but also in other countries.

It was almost a necessity to deal with the kind of aggressive competition our Chinese counterparts were providing. Our manufacturers and Chinese competitors were so aggressive on price that we began to analyse products from the cost point of view: raw materials, direct and indirect labour, in short all of the overheads.

there as I could see it was a powerful market which still had a long way to go.

How many factories does Bobitrans now have in China?

The largest share was, undeniably, direct One that belongs 100% to the Bobitrans labour costs and that prompted us to try it.

Group and three with three subcontractor companies, from which we take 100% of the We also realised that a large percentage of the production.

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INDUSTRY

SPAIN FROM A BUSINESS PERSPECTIVE

So in China, at the present time, we already have a relatively important centre of production. Our workforce numbers in China, in terms of direct employees who are not on Bobitrans books but on our subcontractors' are between 2,000 and 2,500 workers, more or less.

How has Bobitrans' experience been since you first arrived in China?

We've had some very good times, but there have also been some hard and difficult times these last few years. Since we arrived in 1994, fourteen years have passed. We have gradually understood the culture, the people, the way of life and how the Chinese do things in this millennial culture which, sometimes, is not the easiest for Spaniards to understand, although after so many years most things are now understood.

The hardest thing is to integrate and make yourself understood with a Chinese businessperson. In these years, we've obviously travelled there often, have spoken to Chinese friends and have asked them how they see European industrialists who go there to set up, given that cultural differences are sometimes worlds apart, and they always says that they see it as very positive and are very receptive: they do take pride in their culture, and accept some things and some new ideas, but without forgetting how they do things. It's a process of mutual discovery and understanding which is practically constant.

They live more from day to day and the future for them is maybe four months ahead, when for us it's something like one or two years. That difference in mentality makes the two cultures conflict many times from an industrial point of view: they want to see profit quickly. On the other hand, we invest to create profits but also to acquire a knowhow and added value, not only in the short term, but also in the medium and long term and this is a basic difference.

What is vital to make a success of China is that your product is recognised for its quality and good service. If, as a European businessperson, you protect your product in China, maintain a good relationship with the government and pay your taxes, you can rest easy.

Bobitrans came to China to stay. Our goal is for our factories there to produce a profit and generate enough capital to reinvest and continue to grow in China.

We are talking about an enormous market of more than 1.3 billion people in which our intention is clearly to remain, because it is a

market with tremendous potential which is still only just starting to develop.

We will continue to grow in China with our subcontractors and we hope that, in the future, they will become an integral part of our group. That is to say we plan to incorporate those 2,500 workers onto the books of Bobitrans itself, and want to diversify our business offer through future acquisitions that enable us to grow vertically not only in the electronics sector, but also gradually begin to diversify Bobitrans leads the Spanish market and is one of the leading three companies in Europe. What ambitions does Bobitrans have in China?

Firstly, to consolidate our structure, in a strong and stable manner, and from there keep growing and make the most of all of the business opportunities that overseas markets offer us.

Being a leader or even among the first three or four is very difficult in China, but if we can replicate the evolution in China that Bobitrans has undergone in Europe, that will mean that within the next ten years we could be leaders in Shanghai and among the top three or five in the country. It's nice to think so, but this really would be an ambitious objective, because I think it is easier to become a leader in your sector in Europe than it is in China. In any case, we are going to keep working very hard...

What did the acquisition of the inductive components division of Philips Power Solutions mean for the Bobitrans Group?

We are always being asked, 'How did you come to purchase Philips' inductive division?' and our answer is always: 'We didn't buy anything, they sold it to us,' in the sense that they were looking for a solid company, who saw things clearly in terms of future objectives and who would have synergies with them and share the same ideas they have as a group.

At the beginning, we purchased a small

company in Portugal, Philips SCBO – Sociedad de Componentes Bobinados de Ovar, which belonged to the Philips group and, a year after, they realised we were good partners for them: that we fulfilled promises we made and that we could be trusted, and from there on they offered us the chance to acquire the second company, Philips Power Solutions, which was their preferred provider for the supply of components for the power sources for plasma and LCD televisions, and this was what really became an important and strategic business for Bobitrans.

This acquisition was a determining and substantial factor in terms of our economic growth and our qualitative and quantitative development, as regards the number of units we manufactured and our workforce.

With this agreement, we have added new production units in Portugal and China to our factories in Spain (Muel-Zaragoza) and Jiaxing (China) as well as an R&D centre in Eindhoven (Holland), which is ranked by experts as the most advanced components design centre in the world. We believe that positioning ourselves in the electronics sector in general, thanks to innovative and cuttingedge design, is fundamental and, without doubt, this is what we are going to achieve thanks to the R&D plant in the Netherlands.

You have to bear in mind that Philips is one of the world's leading brands in plasma and LCD televisions, videos and, in general, everything to do with electronic goods. This research centre we now have in Eindhoven was built by Philips, and so all the quality standards and qualifications of the engineers we have there are very high indeed: they know the products and the market really well and, logically, this is a huge advantage for us.

The purchase of Philips' magnetic components division enabled us to move into consumer electronics sectors – both sound and vision – as well as automotive and solar energy systems, and also increase our market share in the telecommunications, lighting and industrial sectors. As the company is now Bobitrans, we do not only want Philips, but also Sony, Panasonic, Loewe

17

and more... We want all of the television brands in the market because we have the know-how and the quality of product that is the crème de la crème.

In 2007, we ended the fiscal year with a turnover of some 55 million Euros, given that the acquisition of Philips Power Solutions was carried out in July and so only affected half of the year.

For 2008, we have a turnover forecast of some 85 million Euros. Our goal is to grow by between 20% and 25% a year if we maintain our present structure. If Bobitrans purchased another company and added their assets to our turnover, we might reach a total figure of 150 million Euros. Our duty is to grow with what we have: capture more clients and maximise synergies acquiring new companies, so that the figure of 150 million in turnover is perfectly viable.

The future certainly looks promising for Bobitrans Yes, and especially in respect of Asia and, more specifically, China. I would like to point out that the job the Chinese government is doing to achieve – and in a sustainable way – the spectacular economic growth of China and how they are managing to open the country up on a global scale is worthy of great praise.

The Beijing Olympic Games this year and the International Expo which will be held in Shanghai in 2010 are truly global events and show that China is opening up to the world.

As a Spanish businessman, I would like to extend my most sincere congratulations to the Chinese government and all of its politicians in general for the magnificent job they are doing. You only have to take one reference into account: if it is already complicated to govern smaller countries like Spain, Portugal, Italy or France, imagine how hard it has to be to control a country of more than 1.3 billion people.

China's opening up is being done and will be done in a really good way, with firm decisions and great professionalism.

INDUSTRY

SPAIN FROM A BUSINESS PERSPECTIVE

Manuel Álvarez Álvarez President Álvarez Beltrán www.alvarezbeltran.com

Álvarez Beltrán has 50 years experience and is a leader in the Spanish electrical materials distribution market in high, low and medium tension, cabling, plumbing and climatisation.

Introduction to the origins, activity and development of Alvarez Beltran Alvarez Beltran is a national company that was established in 1953 by Jose Alvarez Beltran, my father, and which entered into a market where there were very few companies distributing electrical materials in Spain. He began opening a small distribution warehouse in Zaragoza and, today, 55 years later, my brother and I are still running the business.

“Quality is not just a goal but a process.

Only this way can we remain ahead” At the present time, the company has 59 branches throughout Spain, which enable us to be close to our clients thanks to a workforce of 1,000 people and 10,000 square meters of floor space, and we continue to focus our activity on an offer of high-quality service in the supply and distribution of all kinds of electrical materials, especially lighting.

We are specialists in electrical materials, lighting, industrial applications, climatisation and new technologies. Throughout our development, we have diversified our product offer but have always concentrated on all that is related to electrical materials.

The main product families that Alvarez Beltran markets are the following: conductors, residential installation materials, servicing installation materials, lighting, medium-tension materials, cable routing, industrial materials, plumbing, heating and automation supplies.

Today, we have more than 60,000 products in stock and around 200,000 in our system. Our company is audited, our turnover is in the order of 300 million Euros and we have witnessed growth of around 18% compared to last year.

In the Spanish market, we are positioned among the leading four electrical materials distribution groups. In the last few years, the

sector has undergone massive segmentation, and it is a fiercely competitive one. Some foreign groups set up here some years ago thanks to the purchase of domestic companies and, on the other hand, many new Spanish companies have been established and have grown gradually, and some of them have become important concerns within the sector.

Mergers and collaboration agreements are taking place, and it looks as if there's a tendency to group together, something which happened in France a number of years ago and which, now, is taking place here, either by means of acquisitions or because some companies merge to become stronger and more competitive.

Are you considering therefore the possibility of expansion beyond Spain's borders?

For the moment, Alvarez Beltran only operates on a national level and our principal objective in the short and medium term is to consolidate our operations in some specific geographical areas within Spain's territory.

At the present time, we have not evaluated the possibility of opening up new markets but, of course, we would look very closely at any offer from an overseas company that was interested in having any kind of agreement with us to do business overseas, especially in terms of the European market.

We do have contact with the Chinese market, but only in an indirect way, because many of the manufacturers for whom we distribute products are already present in China with their own factories. The manufacturing issue is one that is being developed very much in China, but in the distribution sphere it's still a little more complicated or, at least, more of a challenge.

In Spain, our sales network seeks to provide integrated solutions to the needs of installers, and as such is provided with all of the facets needed to best serve our clients. We have a telephone hotline, personal visits and specialised technical departments in all areas of the company. We also have a service that is based on professional attention, the preparation of cost estimates and the provision of customised

projects. In order to maximise the effectiveness of our service, we dedicate part of our warehouses to a display area for products, as well as providing a special area for lighting.

What aspects make Alvarez Beltran competitive in such an aggressive sector and enable you to maintain your leading position?

Alvarez Beltran is an important part of what is know as the distribution channel for electrical materials, but it is not the only one. It's a chain in which manufacturers, distributors, installers and end users are also involved.

Like all leading companies in their respective areas of activity, Alvarez Beltran follows some basic corporate values, among which it is worth highlighting that we offer the highest quality possible in the services and products that we provide to our clients. We only work with the leading brands in the sector, those that guarantee the best reliability, resistance and design of their products, so that a product which is distributed by Alvarez Beltran is always a synonym for proven quality.

Quality control is a very important foundation for our company and this is in constant development. We have a team of very highly qualified professionals who are dedicated exclusively to the continuous improvement of our quality process, as well as the progressive introduction of the necessary structures and most advanced management systems in the new branches which we are opening.

For us, quality is not only a goal but a process. Only in this way can we remain ahead in an ever more demanding and competitive market.

Another important aspect is anticipation.

Moving forward in management, systems and procedures and innovating constantly is the only way for us to stay in the technological lead in our sector. All of our warehouses have the most up-to-date installations and are equipped with training facilities in which we undertake different training schemes and activities for professional education.

Our obligation is to always be the first in knowing about the latest thing in order to offer it to our clients: exploring new sectors, establishing growth strategies and increasing our presence in the greatest number of markets possible is one of the goals of our company.

What is your typical client profile?

Our clients are predominantly electrical installers, both those who dedicate themselves to undertaking new builds like housing or service-sector work like offices, lighting, hospitals, rehabilitation work and so on, as well as the industrial sector. Industry is a very important sector for us, both in terms of the materials they use in their own manufacturing as well as those they make use of in maintenance.

We also undertake projects for the government, especially in the field of public lighting. For the International Exposition in Zaragoza 2008, there have been lots of new public works and we have taken part in some of them, such as the illumination and cabling of the Basilica of Our Lady of the Pillar among others.

This is going to be a very special year for the Aragon region, with the holding of the International Exposition in Zaragoza this year.

Yes, we think so. Zaragoza and Aragon are positioned in a privileged geographical area within the nation. We are very well connected with Madrid, Barcelona and the Mediterranean coast (Valencia) and Zaragoza has huge potential for logistics which could bring foreign companies here who wish to set up their business centres or representative offices.

We know our work as the palm of our hand.

We are specialists. In service. In advice.

In Selection of Products. In technological innovation.

And above all, in total customer satisfaction.

It is what we do better.

Lighting - Industry - Air conditioning - Drivers - Home automation

The forthcoming inauguration of the new airport at Zaragoza will all increase the amount of air traffic which comes to the city and, as a result, I believe that both Zaragoza and the region of Aragon are going through a very exciting time in terms of logistics and economic development and, in this sense, I am very optimistic about the future.

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Aragon's economy is undergoing a huge leap forward both in terms of quantity and quality, and has gradually separated itself from what used to be almost a sole sector of economic development, that of car making, since General Motors set up in Zaragoza.

I believe that, fortunately, the Aragonese economy little by little is diversifying into new sectors and services, which seems to me to be very positive because depending so much on a single sector has the downside of leaving you always a little exposed to what the management of General Motors may decide to do. Being a multinational, if they were to decide to leave Zaragoza, that would obviously result in huge losses of jobs, not only at their own factories but also in the industries that serve them.

Let's hope that in the near future Chinese investors and businesspeople also come to visit us and get to know all about our potential, as I am sure that it would turn out to be an enriching and fruitful experience for both parties.

INDUSTRY

SPAIN FROM A BUSINESS PERSPECTIVE The major step forward we made last year was to merge sound with home automation installations and we did this by combining forces with Konnex, which is the most popular home automation system in Europe. We now have a device that converts our system into that used by Konnex, and Konnex converts to ours. Konnex was designed only for such functions as switching on and off, automatic processes and routines, and so we developed all the sound and home automation part of the system and brought these together via an electronic connection.

Antonio Sánchez Pérez

www.egiaudio.com

The origins of EGI: how did it all start?

What is EGI's position on a global scale?

My passion for music was a decisive influence in the birth of EGI. When I studied commerce, I was a real music fan and set up a group called Las Cuerdas Locas (The Loose Strings), which was one of the first to come out of Zaragoza.

They gave us first prize in one of the competitions we entered, and it was there that I realised that there were enormous possibilities for development in the electronics sector, because the equipment we had then was really basic and very expensive.

In Spain, EGI markets its products and services through 27 partners around the country and via branches in Madrid, Barcelona, Seville and Bilbao.

In Europe, we take part in the leading national and international fairs such as Matelec in Madrid, Light and Building in Frankfurt, Elec in París, Intel in Milán and Endiel in Portugal.

On an international level, we market our products and services in more than 25 countries including Portugal, France, Belgium, Austria, Italy, the United Kingdom, Germany, Norway, Morocco, Saudi Arabia, the United Arab Emirates, Israel, Singapore and even Australia.

So I began to manufacture some equipment for echo and reverb that improved the sound of songs and started to distribute them throughout Spain.

After these beginnings in electronics, I then set up an installations company and noted the needs that were unsatisfied in the sector: I realised that sound systems were used in churches, buildings and even football stadiums, but not in the home, and so the idea to begin to develop customised solutions for home sound systems came about, by means of a technology that permitted the decentralisation of control and power, thus gaining access in this way to many more functions and possibilities than with the conventional system.

My main objective was to bring all of the services together and integrate them in a single one, and that is how EGI was born in 1974. In 1976, we registered our first patent and began to manufacture a series of sound installation modules. We achieved, for the first time ever, an improvement in conventional public announcement systems: the so-called Ampliphón System, which was made up of a modular, balanced system of amplification and audio-signal distribution with a decentralised power source.

In addition, our system has gone beyond the home environment and has developed to become used by commercial outlets and public spaces, from a store to a shopping mall or an airport, from hospitals to old people's homes, including large installations and using IP technologies as well, but always focusing on sound.

At present, EGI has four basic product lines:

simplicity of 100V linear systems, thus enabling a choice of various independent musical programmes for any space with the emission of messages from traditional consoles, telephones and even from automatic systems.

Communication and management of personal alarms through Secura by EGI, which allows for communication and management of personal alarms in public spaces and, especially, in hospitals and old people's homes.

And the latest addition is lighting. In 2005, we acquired XENON, a lighting company whose products are now wholly integrated into EGI and with which we complemented our sound installation products aimed at electrical installers. The Sound & Lighting and Xenon Lighting series which enable us to offer a very wide range of lighting solutions which go from LEDs to the traditional dichroic lamp as well as combined lighting and sound solutions.

So, EGI integrates sound, lighting and domestic functions in a single installation, which also helps to reduce costs.

Sound and home automation installations with the Domos and Domos2 series, which provide the greatest possible functionality to manage and enjoy your home. Our systems enable you to listen to your sound system throughout the home and to choose which music you'd like to listen to in each room, without interfering with the choices made by the other members of your family. As well as offering the highest possible performance in terms of sound, Domos2 includes many home automation functions, such as, for example, controls for lighting and the activation and deactivation of alarms from the same remote controls used for music.

What kind of profile do EGI's clients have?

To list just some of its characteristics, Domos2 can manage five music programmes, has remote controls with large illuminated LCD screens, remote tele-control of external music sources, a clock with the exact time via GPS, an alarm, room surveillance, automatic door opening for the home, general and independent intercommunication call functions for up to 50 areas, an SOS function, message recording, inside and outside temperature, an intruder alarm connectible via a card with a copy-proof chip, connections to GSM mobile telephones, remote control for different mechanisms in the home from a mobile or fixed phone, remote control of alarm with sensor jacks for gas, flooding, power outage, the control and regulation of lighting and compatibility with Konnex-EIB systems via an interface.

The fact that we integrate, in a single concept, sound, lighting and home automation installations is already, in its own right, a great competitive advantage. Other pillars of success which have positioned us as leaders in the Spanish and the European markets have to do with staying ahead of the pack and with our ongoing investments in technology.

Sound installations for public spaces with the Millenium, Escenic and EGI-Paso series. Millenium combines plenty of performance and the flexibility and ease of use of decentralised systems with the

Our most direct clients are the electronics materials warehouses that purchase our sound products.

They are the leading platform via which we have access to the great majority of electrical installers.

We always go to our electricity warehouses to begin with, then to electrical installers, and it is usually through them, the electrical installer, that our products finally arrive at the end user.

What would you highlight as the most important competitive and differential advantages that EGI has?

We have 27 engineers: normally, large companies would have between four and five engineers, maybe a maximum of 10, and, as small as we are, we have more than 25.

Investment in R&D has been decisive in the positioning of EGI as a leader in the sector. We spend more than 20% of our turnover on this aspect, and 25% of our human resources are dedicated to this task. Through research, we look for ways to simplify installations, provide more functions at a lower price and optimise the performance of the electronics.

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Even though EGI is the market leader in Spain and Europe, until now we had not really planned a true international expansion. We have clients all around the world and often work with companies who have come upon us at one fair or another, we have representative offices in many nations which attract new clients but what we really need is a large distributor: that is our next goal and, for this new stage in the marketing and internationalisation of our company, we have hired the person who was previously BMW's sales manager in Spain: through him, we are going to start looking for partners in different countries to create shared offices and so have a part of our company present in each country. We have a limited presence in Singapore, and so, apart from the European Union, Asia and more specifically China will also be important markets for us.

In just a decade, China has gone from being an emerging market to become the third largest economy in the world, only behind the USA and Germany...

When I was in Shanghai, I was absolutely amazed. China is a market with massive potential, it's economic awakening has been truly astounding, and also the Chinese are so hard-working and persistent and have such a huge capacity for self-sacrifice.

For EGI, China represents two very important aspects: on one hand, China could act as a provider for certain materials and, on the other hand,

we could well set up there and, in this way, not only be able to purchase but also to sell.

China offers unlimited potential for EGI to exchange know-how and services.

I am sure that China will be a very important market for us over the next two or three years. We are very ahead in terms of our systems and I imagine that they will also begin to be used in China.

We are focusing our efforts on the search for suppliers within various fields that include electronics, acoustic and lighting components. Within the different product ranges about which EGI has had previous contacts with Chinese companies, we might find integrated circuitry, power sources, remote controls, solar panels, shades and screens for lamps and loudspeakers. At present, we are in contact with various Chinese companies for the purchase of new products such as components for development and innovation in loudspeakers.

In China, the loudspeaker industry is especially important: for the last few years, we have deepened our commercial relations with the Tianjin Zenmay Electroacoustic Equipment Company. In addition to its large range, the choice of Tianjin Zenmay as a supplier was strengthened by the quality of their products – which was in harmony with EGI's position as regards sound quality – the fact that they held ISO9001:2000 certification, their ability to respond to our demands and their experience and strategic position in the loudspeaker world, given that they are also suppliers for other important companies.

Tianjin's growth plan, both in terms of production capacity and installations, also works well with EGI's own expansion plans, and the recent commercial trip that their managers made to our factory enabled us to reach a new level of understanding and also to establish new projects for the future involving both companies.

The success of EGI's commercial relationships with Chinese industry has only reinforced our interest in consolidating and increasing our supplier base in the Asian giant, in search of maximising our competitiveness

Shanghai Roy Solar Co. Ltd. www.roysolar.com Tianjin Zenmay Electroacoustic Equipment Company www.zenmay.com.cn Yumuy World Trading Shanghai Co. Ltd. www.yumuy.com

Sound distribution, intercom & public address system for public installations

SPAIN, ENERGY POWER

SPAIN FROM A BUSINESS PERSPECTIVE market, but it did have serious problems both in terms of supply and quality, and we contributed greatly to improving the electricity service there.

Rafael Miranda Chief Executive Officer Endesa www.endesa.es

Competitive and differential advantages that Endesa has for potential new partners or investors who, possibly, would wish to undertake joint ventures or benefit from the company's know-how.

Endesa is the largest electricity company in Spain and Portugal and the leading private electricity company in Latin America. It is a very large electricity supplier in the Euro-Mediterranean area, especially Italy and France, has a growing presence in the Spanish market for natural gas and a very high level of development and understanding in the field of renewable energy.

Introduction to the scope of Endesa today, in Spain and around the world Endesa is the number-one electricity company in Spain, and leads the electricity market in Spain and Portugal and also Latin America, where we are the largest private company in Argentina, Chile, Peru, Colombia, Brazil and throughout Central America. We are also one of the leading companies in Europe and have a major presence in France, Italy, Poland, Turkey and also in Morocco.

In terms of size, we have 25 million clients all over the world, with around 50% of them in Europe – and especially in Spain and Portugal, where we have 10.5 million clients alone – and with the rest in Latin America.

We have a total installed capacity worldwide of approximately 46,000 megawatts, a workforce of 25,000 employees and produce some 130 terawatts/hour, all of which goes to show that we really are a big company.

Aside from Endesa's primary business area of electricity, has the company begun to move into other products?

Endesa is an energy company whose basic activity is centred in the generation, distribution and marketing of electric energy, as well as in the distribution and marketing of gas in all the markets in which the company operates.

Endesa is a tremendously efficient company, with the most competitive generation mix there is at present in the markets in which we operate, and in Latin America all of the assets we have are basically in hydro and thermal energy, which are very competitive. This gives us a very good position in terms of liberalised markets around the world and we have achieved this thanks to our competitiveness and efficiency.

In addition, Endesa has two representatives in China, one in Beijing and the other in Shanghai, who are dedicated to understanding the market for emissions rights in China, and we have also opened, just a few weeks ago, Endesa sales offices in both Shanghai and Beijing.

There are so many possibilities for interaction between Spain and China from an energy point of view. In the end, China has a very significant demand for raw materials, which in some way is now seriously affecting prices in global markets. I believe that we will have to be very attentive to the many opportunities that may come out of this.

On the other hand, China is an important investor in Latin America in activities that, sometimes, are energy demanding and, as suppliers, we

As regards generation, Endesa has a generation mix via which we cover practically all of the available technologies: more than 50% of all our installed capacity around the world is made up of what we call renewable energy – be it hydro, wind, solar or biomass – and is therefore CO2 emission-free if we also combine that with nuclear energy.

Endesa is also the leading nuclear company in Spain, ahead of the second-placed company, Iberdrola.

We are also in the lead in Europe as regards generation using clean coal: a number of years ago, we developed a project of clean coal generation using an IGCC (Integrated Gasification Combined Cycle) plant which we have in Puerto Llano, in which coal is gasified, and which will be a very important element in the development of future technologies completely free from CO2 emissions and linked to the uptake and storage process of coal.

Therefore, we have a very significant position in renewable energy, in addition to which, as a result of the entry and control of new shareholders in Endesa – Acciona and Enel – Acciona and Endesa are now going to combine assets in renewables and are planning to create the largest renewable energy company in the world.

In Europe we have also developed a very competitive position that has enabled us to undertake energy management even in those countries where we do not have the capacity to generate, as is the case of Germany, a nation where we have major clients thanks to the fact that we boast a very significant position in France and in Italy.

Acciona is a very large and well-known operator in renewables, and the establishment of the new company will be completed over the next few months.

In the distribution business, we are also a very competitive agent and have lots of experience: we have improved the quality of service exponentially and have reached the highest possible level of quality in Spain and in the rest of our markets.

In Latin America, we serve five of the six major capitals in generation and distribution of electric energy: Rio de Janeiro, Buenos Aires, Bogota, Lima y Santiago de Chile. In the gas sector, we are the second most important operator in Spain, with 14% of the market share in distribution and marketing and our objective is to get to a market share of approximately 20% over the next two or three years.

In the area of climate change, Endesa has launched a major development project and today is the leading company worldwide in terms of Clean Development Mechanism (CDM) activities, many of which are linked to China.

Latin America was a relatively liberalised

At the present time, Endesa has one of the highest growth rates among European energy companies, has provided very large dividends for our shareholders and, in terms of market value, we are a company worth almost eight billion Euros, which is quite an impressive figure.

What does China represent for Endesa and what kind of activities is the company carrying out there?

Both China and India have revolutionised the global energy sector, so any global company that works in the energy industry has to take this phenomenon into account.

The scale of operations in China is so huge that obviously China offers enormous opportunities in technology and engineering, areas in which Endesa can provide many solutions t h a n k s t o o u r k n o w - h o w.

We have signed an agreement with Huaneng and Jiuquan Sanyuan Hydro Power for knowhow exchange and technology transfer for the period 2006-2012, which also covers issues related to distribution and generation, and to purchase 100% of the greenhouse gas emission reductions in three wind farms and a hydro plant in China, which are worth the equivalent of more than 2.7 million tonnes of CO2, and their Chinese technicians come here frequently to be trained at our power plants.

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can provide comprehensive energy solutions, so there is potential there for very significant synergies between both nations.

Europe has decided to take the lead in the fight against climate change and, as a result, European energy companies are playing a key role in achieving the goals that the European Union has set.

The objectives are fundamentally focused on the reduction of CO2 emissions and Endesa has committed itself to reducing its emissions on a global scale by 50% by the year 2020, and we will be able to achieve this thanks to the initiatives that we are planning to develop in the field of renewable energies.

The EU has also demanded that, by the year 2020, there is a substantial improvement in terms of energy efficiency and in this aspect we are also putting initiatives into action on a global scale that are linked to clients making more responsible and efficient use of energy. On the other hand, we are also going to improve the performance of our own plants with very concrete programmes.

And finally, there is also the technology issue which is also key because apart from important developments in renewable energy, Endesa is also going to

“Spain can offer very interesting practical solutions to China in the field of renewable energy, especially in that relating to technology, and could be an important supplier to China in many areas in the economic sphere” play a very important role in the European Union in the development of uptake and storage technology for coal, which could prove to be massively important for China, as it is a country that uses many fossil fuels and we now all know that, in the fight against climate change, global targets will not be reached if we do not get China and India to take part in an active way and so it will be necessary to transfer technology to them.

Because of this it is vital that we have signed technology transfer agreements with Chinese companies: Europe is going to develop 12 demonstration plants for the uptake and storage technology for coal which, perhaps, is the technology generating the greatest expectation

SPAIN, ENERGY POWER at the moment in order to achieve a real reduction of CO2 emissions to practically zero, and Endesa is going to be working together with Enel in the three main technologies, which are oxi-combustion, pre-combustion and post-combustion, and making an investment of more than 100 million Euros in R&D for these pilot plants. In addition, we have a scaled 500 MW demonstration project, which we hope will provide an important impetus within the flagship programme that the European Union is going to put into place.

If the EU, together with the United States, is able to develop this technology, I believe that it will end up in Chinese hands or, at least, that there will be very important technological development links with China, because for us to be able to reach the targets set on a global scale by the Kyoto and Bali protocols, it is fundamental that China be involved fully in the development of technology.

Furthermore, we have to make an additional effort linked to energy efficiency in other sectors which consume energy such as the transport industry for example, which is another large emitter of CO2 and, in all these processes, Endesa is playing a very important part.

What is your vision of the future for the energy sector?

The world is now at a major energy crossroads.

There are three challenges to be faced, which are the focus of all of the international congresses and are being analysed by the gurus and heads of state: on the one hand, the world needs huge amounts of energy to serve developed nations, who demand important energy solutions to continue to progress with their development, but, on the other hand, there are about 1.6 billion people on the planet who still do not have access to electricity.

As a result, the first challenge is assure supply: we must not forget that a large part of security is based on raw materials found in countries that normally are not the consumers of these great masses of raw energy, and so we have to look for integrated solutions, given that some nations have raw materials, others have technology and others financial resources, and they they are often not the same.

Tt is vital that there is good understanding on an international level so that those countries can make use of raw materials and others can aid those nations in their development. The issue of supply security is crucial; without it, the world would simply stop, both developed nations and those which are developing.

Secondly, competition in the offer and solutions for energy is very important as is that nations choose their energy mix correctly. To do so, you have to consider all possible technologies and that is exactly what China is doing now and very correctly indeed.

It is clear that renewable energy is extremely important, of course, as another important aspect we have to face up to is climate change, but, at the present time, we need a more complete combination of the appropriate types of energy: renewables need to be developed, but we also have to develop nuclear – which will play an increasingly important role and a safer and safer one – and clean uptake and storage technologies for coal, and also new technologies linked to hydrogen, fuel cells and so on.

And all of this has to be done in accordance with environmental protection. I believe that, fortunately, we have all now become aware of the fact that we have to take steps to reduce greenhouse-effect emissions and to reduce CO2 and NOX emissions, and all of this requires integrated global solutions and a great technological step forward.

Because of all this, technology will be the key.

Office in Beijing: B12, Jianguomenwai Av. Twin Towers East, 10th floor. - Beijing 100022 Phone: (+86) 10 51235055 Fax: (+86) 10 51235122 Contact: Javier Mayayo Treviño Office in Shanghai 25th Floor, Westgat Mall -1038 NanJing Xi Road Shanghai 200041 Phone: +86 (21) 62172620 x 812 Fax: +86 (21) 62677750 Contact: Santiago Díez Mobile +86 (1381) 6643685 E-mail: sdieza@endesa.es

SPAIN FROM A BUSINESS PERSPECTIVE

“Thanks to new shareholders in Endesa – Acciona and Enel – Acciona and Endesa will combine assets to become the world's largest renewable company” Likewise, over the next few years, the world is going to need to add huge amounts of new installed capacity in the electricity sector and China specifically is going to be the absolute leader in this field: if we are not able to get it right with sufficient intelligence and the appropriate solutions, then we can be sure one of those three aspects will not be dealt with, and so we are truly at a vital crossroads.

What should China know and remember about Spain, and more specifically about Endesa?

Spain has a very dynamic economy which offers very interesting practical solutions for a nation like China in many areas of economic activity in which Spain is a clear leader, such as the construction industry, in renewable energy and other energy solutions, and Spain also has some very important engineering concerns.

The issue of long-term investment is a little more complicated, because we have to wait and see just how China's regulatory structures will develop, but I believe that, in this sense, there could be an important area in the future, in the long term, once liberalisation has taken place in certain sectors in China.

China has to understand that Spain can be a major supplier for many and varied economic activities, especially in energy solutions, equipment, engineering solutions, technological solutions, and solutions in the field of operations and maintenance of those energy solutions in electricity.

What are the high points of your experiences that have occurred during your long career in Endesa?

I came to the energy world in 1987. I joined Endesa as the Managing Director of what Endesa was at the time, which was basically an electricity generation company, and since then, we have developed the construction of what Endesa is today step by step.

The first thing we did was begin to develop the market presence of Endesa, because we realised that in the future with the processes of liberalisation that would take place, companies that were not very involved with the markets and with their clients would not actually have a future at all.

We were able to develop firstly within Spain's borders, and integrate seven companies into a single one, which is the Endesa of today, with businesses that, at the time, were generation, and then distribution and subsequently were then also marketing and sales. Today, Endesa is the leading Spanish seller in the free market.

We then realised we also had to launch our internationalisation, and, first of all, we aimed for the natural market of most Spanish companies, and following the rest of the major Spanish economic forces which rushed into Latin America in the '80s and '90s, we took a huge step in 1997 with the overall control of the Enersis holding, which, together with that we already owned in Latin America, provided us with the leading position which we still hold today.

Europe, which was then an open, liberalised market, also offered many opportunities, especially in Italy and France, so we began to develop Endesa's European project.

In liberalised markets, today it is very easy to make dual offers of electricity and gas and, in the phase we are in at the moment where we are very close to the markets and to our clients, we are adding valueadded services to many products, through which we are helping clients solve their energy needs.

From a financial point of view, Endesa, in its origins, was a public company which belonged to the state and, as a result, I also oversaw the complete privatisation of Endesa in 1997 and, therefore, we have been in very close contact with all of the financial markets in which Endesa is a very well-known and highly prized company.

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SPAIN, ENERGY POWER

SPAIN FROM A BUSINESS PERSPECTIVE

Introduction to the history and current scope of CLH The Compañía Logística de Hidrocarburos CLH, S.A (Hydrocarbon Logistics Company CLH, Plc.), was created in 1993 after the dissolution of thecommercial assets of the former Campsa, the lessee petroleum monopoly in Spain, whose principal function was to purchase product and sell it at service stations to respond to demand and supply the market.

When Spain entered in the European Common Market in 1985, a deadline was placed on the petroleum monopoly and the decision was taken to adapt the former Campsa to the new market situation and then became a logistics company, so it no longer buys and sells product, but transports it to all the operators in the marketplace.

The model finally chosen is very modern, efficient and uses the latest-generation technology. In turn, the name of the company was changed, which went from being Campsa to become Compañía Logística de Hidrocarburos (CLH).

Under this new model, a major opening up of the market for petroleum products was achieved in Spain, as operators no longer needed their own logistics solutions, but instead all the infrastructure that CLH inherited from the former monopoly was placed at the service of those who wished to sell products in petrol stations.

CLH then embarked on a big optimisation process with the goal of modernising and becoming more efficient. Today, CLH is the leading company in the transportation and storage of petroleum products in the Spanish market with 80 years' experience in the sector. Our plants are open 24 hours a day, seven days a week and we are one of the most efficient integrated logistics businesses worldwide in the storage, transportation and distribution of petroleum products.

We operate throughout the peninsula and the Balearic Islands, guaranteeing free access to our logistics systems to third parties also.

CLH has one of the largest and most efficient integrated transportation and storage networks worldwide for petroleum products, with over 3,500 kilometres of pipeline and a storage capacity of 6.5 million cubic metres, which are made available to all the petroleum operators active in Spain.

As Chairman, you had a lot to do with that modernisation process.

Yes, when we implemented the new logistics model I was responsible for the technology and went to the United States to see how they dealt with this kind of logistics in an open market.

There we saw all of the problems and needs that petroleum operators had in these markets, such as branded additives. The great advantage of a good logistics systems like the one at CLH is that we handle products in an indiscriminate way. Within our system, all the petrol and diesel fuels have the same specification, and are differentiated at the time they leave our terminals, when they are loaded into their respective tanker lorries that transfer the product from our terminals to the petrol stations.

and the quality of the products that will be delivered at the end of the process.

José Luis López de Silanes President & Chief Executive Officer CLH www.clh.es

We have over 30 operators who introduce products into the network and carry out a very exhaustive quality control process.

How is CLH adapting to the new renewable energies?

The EU's commitment to biofuels is very significant, and there is already an obligatory amount set for 2010. We already have three terminals – Madrid, Barcelona and Bilbao – which add the percentage of biofuels the operator desires to the product, in a fully automated manner, at the time of loading, whether that is 5, 10, 15 or 20%.

“CLH is the leading company in the transportation and storage of petroleum products in the Spanish market with 80 years' experience in the sector. Our plants are open 24 hours a day, seven days a week and we are one of the most efficient integrated logistics businesses worldwide in the storage, transportation and distribution of petroleum products” By the end of 2008, we will have 13 installations When it does leave, Repsol's petrol or diesel is different from BP's or that of another company, because we have added a quality additive through an automatic process which personalises the product depending on the operator. All of this is done automatically, in a process where the only person who intervenes in the operation while loading the tanker is the driver of the lorry.

emissions, because it eliminates the need for a lot of wheel-turning. Our system can eliminate more than 400,000 tonnes of CO2 every year.

We are always looking at what the latest technology offers to implement it in our system. In this way, we have become a very efficient, integrated and transparent company, and so those operators who wish to sell here have no need to make any investments in logistics.

Another important characteristic of our system is

So, in some ways, CLH is a well-kept secret, as its model is exportable to the world Indeed, our system is one of the most efficient in the world and I believe a system like that we have at CLH could be a very interesting model to implement in China, because they are working towards opening up the petroleum market, and one way to make the process easier would be to open up infrastructure to other operators. that CLH is responsible for collecting the duty on hydrocarbons, and so we facilitate this function for the state. Also, because we do not sell the product we are a very neutral and transparent operator. We offer the same service to all our clients, be they small or large, and their trade secrets are safe given that we do not compete with them. Furthermore, the price we charge is the same for all, regardless of what their volume may be.

capable of providing these services and we will have a logistics system able to operate with pure biofuels as well as with those mixed with fossil fuels.

What are the possibilities for Spain from an energy point of view?

Spain has made a very serious commitment to renewable energy. We have various companies, in wind and solar power, who are becoming pioneers around the world.

The Spanish business world, with the support of the government, has positioned itself in the global vanguard of technologically advanced companies for the production of equipment used for renewable energy.

Also, from a consumption of renewable energy point of view, Spain is becoming a leading nation and has one of the highest rates worldwide in using wind power for the production of electricity.

As regards the consumption of liquid fuels, given that Spain does not have its own production and we have to import it, what is being done is to reduce energy intensity and gain in efficiency.

Our network of pipelines is the largest network for refined products in Europe. They unite our terminals with refineries in the principal Spanish ports in an integrated system, and so we also gain massively in efficiency, as we manage both the pipelines and the terminals from a single control centre located in Torrejón.

In terms of controlling the product, our system works as if it were a bank account: when you put product into the network, it is noted at the terminal and, when you take it out, you simply subtract. If you do not have product at a given terminal, obviously you cannot withdraw any, so you have to keep adding product as you take it out.

In the building at our headquarters, we have a back-up to manage the elements which make up the pipeline network and the terminals, which are operated from central dispatching station.

We use a communications system via satellite, which can handle up to 90,000 parameters and which is refreshed every five seconds, and so this gives us a high level of efficiency and security when it comes to managing the network.

This system, which is an apparently simple concept, is actually complicated to put into practice when you have to manage various operators with different products and many terminals. So our model, our experience, our know-how and our technology could well prove very useful.

Another aspect in which we have plenty of experience and which could also be exportable is fuel distribution services for aviation. CLH has a subsidiary, CLH Aviación, a company created in 1997 and 100% owned by CLH, which is present in the majority of Spain's airports, including Madrid (Barajas), one of the largest airports in the world, and offers storage, distribution and service into plane of aviation fuels and lubricants.

The pipeline is the most efficient and safest form of transportation, as it is independent of the weather and the state of the roads. It is also a transportation system that greatly reduces CO2

What are your priorities for CLH's international expansion?

Logically, the closest countries to our own territory, like Portugal, are those where we want to work in the future to expand our network, but without forgetting those nations which want to develop from a monopoly situation to an open market. We can place our experience in managing a complex distribution system, open to various operators, at the disposition of those operators, which may help them to move more rapidly towards the opening up of the market.

CLH is one of the few Spanish companies that has had a Chinese company (China Aviation Oil, which sold its shares in 2007 to a Spanish financial entity) as a shareholder and we would be very interested in taking part in the opening up process of the petroleum sector in China.

The opening up of the petroleum market requires logistics, and permitting the use of logistics infrastructure by other operators is necessary to move forward with speed, with complete reliability as regards volumes that need to be managed

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And another important commitment is the increasing use and replacement of fossil fuels by biofuels. In Spain, we are building numerous biofuel manufacturing plants, which will enable us to have sufficient production capacity to meet our needs. In short, Spain is very well positioned in both senses: in companies that produce equipment and in the use of renewable energy.

CLH is a company with over 80 years of history and is in constant evolution.

CLH has always believed in using the best available technology and this has been key to achieving the high levels of efficiency, quality and security that we now have.

Recently, we have won an award from an important Spanish technology association (Autelsi) for the implementation of portable terminals for the supply of planes, which has enabled us to greatly improve our service levels in Spain's airports.

Another of our current goals is focused on injecting new blood into our workforce, which will transform CLH into a younger company which will continue to progress towards the kind of excellence we are always searching for.

What should China know, and remember, about CLH? Spain is following the impressive development of the Chinese economy very closely and we should congratulate them on all that they are doing, but the world today is very competitive and demanding and they need to implement new formulas constantly, with the aid of new technology, to continue to increase productivity.

The petroleum sector is one of the most competitive worldwide, and so petroleum companies need to be ready to compete and offer very efficient energy at good prices.

To do so, having efficient and multiple access logistics systems available is necessary, and to make them available to petroleum operators, to open markets up with much more dynamism and that is where CLH could take part and collaborate with Chinese companies, helping to accelerate the process.

CLH is a very successful company and could well be the perfect partner for Chinese companies in order to promote exchange and tighten the links between both markets.