Position Paper. The impact of Coronavirus on the Spanish Rail Industry

THE ASSOCIATION PUBLISHES A POSITIONING NOTE ABOUT “THE IMPACT OF CORONAVIRUS ON THE SPANISH RAIL INDUSTRY” MAFEX REQUESTS THE IMPLEMENTATION OF POLICIES WHICH ALLOW, IN A SUSTAINED AND PLANNED MANNER OVER TIME, TO FAVOR BUSINESS ACTIVITY, AND THEREFORE EMPLOYMENT, THROUGH SUPPORT FOR INNOVATION, INTERNATIONALIZATION AND SKILLS GENERATION, WHICH CAN ONLY BE ACCOMPLISHED THROUGH EITHER THE MAINTENANCE OR THE INCREASE IN INVESTMENT IN RAIL TRANSPORT AND MOBILITY.

On March 14th, the Government of Spain declared, in a Cabinet meeting and for the second time in the history of democracy in the country, the State of Alarm. This decision was a direct consequence of the health emergency situation triggered by the spread of the COVID-19 virus.

Spain is not the only country in the world in this situation. After China, affected since December 2019, and the declaration of a global pandemic by the WHO (World Health Organization), many of our European neighbors have adopted the same measure. The US, Latin America, Asia, the Near East and the Middle East, Australia and New Zealand are also being hit by the virus.
The confinement of the population, imposed to try to stop the expansion of COVID-19, has led to the de facto paralysis of almost all economic and industrial activity. This circumstance has been aggravated since March 28 by the tightening of mobility restrictions by limiting activity to essential sectors (primary, health, food distribution, etc.) until, in principle, April 10th.

Our members had acted accordingly and, to guarantee the health of their employees, they had already taken measures such as teleworking, applied to 80% of their workforce, and implementing the corresponding hygiene and safety protocols in their production units, closed since March 30th.

At the same time, Public Administrations have adopted other measures which are proving to be very detrimental to our business sector, such as the halt of contracting procedures and the execution of projects, which is generating greater uncertainty, as it is also impossible to clearly measure the duration of this global pandemic.

Proposed measures

In a sector like Rail, so strategic and at the same time dependent on public investment, if appropriate measures are not taken this crisis can have very serious consequences. Therefore, we propose as necessary:

  • Firstly, to generate a direct and coordinated dialogue at all levels – Government, Unions, Sector and Business Associations must work hand in hand.
  • Request European institutions to promote investment in rail infrastructure and R&D. Considering that the European Commission has proposed 2021 to be the ”European Year of Rail”, this consideration makes even more sense.
  • No paralyzing public tenders, ongoing contracting procedures or projects under execution – once these weeks of minimum activity are over, and following the example of other countries, both ongoing and upcoming procedures and contracts should be not only accelerated, but also investments planned for the coming years advanced to 2020 with the idea of returning to normality as soon as possible, and causing the least economic damage to our companies, allowing them to recover from this debacle as soon as possible.
  • Advance of collections and deferment of payments – it is essential for the survival of rail industry, and especially for SMEs (60% of our Association), the deferment (not waiver) of payment of the corresponding obligations / debts with the Social Security Administration, different Tax Agencies, etc. This measure will be more effective if it is accompanied by the mobilization of Public Administrations to expedite pending payments of the same nature, as well as those derived from any contractual relationship with the industry. In these critical moments, maintaining financial liquidity is a key aspect.
  • Non-application of penalty clauses in case of non-compliance with delivery deadlines and possibility of renegotiating contracts. This condition mainly applies to clients from third countries. From Mafex we want to convey to the Government the need to issue an official certificate which comes to enforce the exceptional situation of force majeure that we are undergoing, and which will allow companies to allege this circumstance to justify any delay derived from production limitations.
  • Early adoption of measures to stop the increase in unemployment and the loss of talent.

We, the Spanish rail industry, would also like to show our concern about:

  • Restrictions to exports and investment, the total or partial closure of borders and the negative effects of these protectionist measures on the normal functioning of global and regional supply chains.
  • The new economic situation resulting from the current blockade.

Conclusion

Mafex fully respects the economic support measures in which the Spanish Government is working and which reinforce the Economic Shock Plan launched on March 10. However, we ask for major political effort in preparing and coordinating actions that protect the economy and the industry, preventing us from suffering a much-feared setback.

Thus, once this health crisis is overcome, special attention must be paid to the restoration of employment and the adoption of measures aimed at mitigating the upcoming economic damage. This can only be achieved through the early implementation of specific set of ambitious actions aimed at the restoration of the country’s economic activity and workforce.

This consideration is set to be framed within the current context of urgency in speeding up administrative procedures and reducing bureaucracy to achieve the necessary agility and avoid delays which worsen the financial environment of our companies.

In this sense, we must highlight that the Spanish railway sector owes its success and global leadership to last decades’ investment in the national market. We therefore insist on the need to resume, as quickly as possible, the existing investment plans in railway infrastructures to help our industry return to the path of development and employment, and try to minimize the impact of the current crisis.

At the same time, we believe it is essential to redesign the Government’s internationalization strategy, mainly by creating effective and flexible financial instruments (preferably non-refundable) to help us promote the competitiveness of our companies. Such ambitious goal can only be achieved through a very close collaboration between all the public agencies involved (Ministries of

Economy, Finance, Foreign Affairs, ICO, etc.) and industry. It is also fundamental to insist on the fact that international promotion is totally paralyzed, which is creating even more uncertainty on whether these strategic activities will be resumed in the medium term, since they are an indispensable tool for any company.
To sum up, we also want to share our concern that the current crisis must not at any time serve as an excuse to reduce the Government and sector commitment to innovation.
Todo ello partiendo de una política de conservación o incremento de la inversión en transporte y movilidad ferroviaria.

Today more than ever, and once the emergency situation is overcome, we would like to request the immediate adoption of measures that alleviate the paralysis of our industrial activity. We also urge the implementation of policies which allow, in a sustained and planned manner over time, to favor business activity, and therefore employment, through support for innovation, internationalization and skills generation, which can only be accomplished through either the maintenance or the increase in investment in rail transport and mobility.

The report can be downloaded from the Mafex website: www.mafex.es

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