Competitiveness: The Basque Country Experience

12th INTERNATIONAL CONFERENCE ON COMPETITIVENESSDonostia- San Sebastian 10 July 2008

ALBERTO ALBERDI LARIZGOITIA

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“The Basque Country is one of the few regions in Europe that has made significant progress in upgrading its traditional industrial base”

Michael E. Porter

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A LONG TERM VIEW 1980-20061. Macroeconomic Context2. Institutions and Public Policies3. Industrial Policy4. Technology Policy5. Energy Policy

ECONOMIC RESULTS6. Main Indicators7. Exports: Share and Sophistication8. Productivity and Labour Costs in the Industrial

Sector9. European Innovation Scoreboard10. The Second Great Economic Transformation

NEW STRATEGY FOR COMPETITIVENESS 201511. Competitiveness Model 12. Open Innovation13. Technological Strategy14. Size and Groups for the Global Economy15. Strategic Objectives and Results16. Internationalization of Basque Groups

FINAL REMARKS

Contents

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A long term view1980-2006

1

5

1.1 Macroeconomic Context

GDP per capita market prices 1980-2006 MACROECONOMIC FRAME: Institutions and Economic Integration

3000

8000

13000

18000

23000

28000

Basque CEU 27

Basque C 3132 3545 3980 4371 4890 5448 6132 6969 7952 9046 9993 10700 11383 11754 12600 13635 14573 15653 17108 18537 20030 20968 21870 23246 25090 26835

EU 27 14600 15400 16200 16900 17800 19000 19700 20400 20700 21600 22400

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

1986 Integration in the European Economic Comunity

1980 New Institutional Framework Statute of Autonomy 1992-1993 Deep Recession:

65.000 jobs lost

1980-85 Industrial restructuring

2002. The euro

1994 Second phaseMonetary Union

1998: Set up of BCE and definitive rates of exchange

1996-2006 Creationof 270,000 new jobs (38% increase)

1982-1986 Sharp Increase of Public Spending and public policies

Source: Eustat, Eurostat and ow n

1989-91 Strong apreciation of the rate of exchange (peseta)

Convergence in GDP per capita at market prices

6

1.2 Institutions and Public Policies

Statute of Autonomy 1979-Institutional wealth.

Own treasury, collecting most of the taxes and strong

spending capacity

New welfare net: Universal Health, Education, Housing,

Basic Income and social services

“Europe 93” “Euskadi XXI” and “Euskadi 2000Tres” three Plans

for Infrastructures and social cohesion

Industrial Policy: Restructuring, promotion, land, energy,

clusters, technology, internationalization and

information society

Strategies and plans on Cities, Territory and environment: the

success of Bilbao

BASQUE GOVERNMENT PUBLIC POLICIESSpending as % of GDP 1981-2002

0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

1618. Public Debt

17. Tourism and Commerce

16. Business Promotion

15. Agriculture andFisheries

14. Economic Regulation

13. Research

12. Other Infrastructures

11. Transports andcommunications.

10. Basque language

9. Culture

8. Housing, Territory andEnviroment

7. Justice

6. Education

5. Health

4. Social

3. Welfare and SocialAssistance

2. Security

1. Administration

1998- Fiscal consolidation Preparing for the EMU.New technology policy

1981-1989 Economic restructuring, new policies and increasing expenditure

1989-1998 Infrastructures, social policy and increased debt

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1.3 Industrial Policywww.politicaindustrialvasca.net

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1.4 Technology Policy www.politicaindustrialvasca.net

1982  1990  1997 2005  2010 

2006‐ 2010ORIENTATION 

TOWARDS RESULTS POLICY

Business diversification, social competitiveness

1997‐2005

OFFER AND DEMAND COMBINATION POLICY

Consolidation and orientation of the Basque S&T towards the social and business needs

1980‐1996OFFER POLICY

The basis for the actual Science and Technology network were established

SCIENCE, TECHNOLOGY 

AND INNOVATION 

PLAN2010

bio BASQUE

nanoBASQUE 2015

9

6%

41%

5%9%

39%

25%

61%

2%

11%

1% CoalOilNatural gasRenewablesElectricity Import

14%

50%

4%

16%

16%

1.5 Energy Policy

2006- 2010PREPARING FOR A NEW ERA

Security of supply, development of technology, maturing renewables, and contributing to Kyoto aims

1996-2005CONSOLIDATION

AND BROADENING

Towards electric self-sufficiency and Wind energy

1991-1995DEEPENING THE

STRATEGY

Development of infrastructure for gas

and electricity

1982-1990SHOCK POLICY

Saving and efficiency1st Diversification: natural gas and renewables

1982  1990  1995 2005  2010 

SGE1982

CADEM1981

EVE1982

SHE1983

NATURGAS1987

IHOBE1983

Bizkaia EnergyCombined Cycle Plant2005

Privatization of Naturcorp2003

Bahía de BizkaiaLNG Import Terminal and Combined Cycle Plant2003

Santurtzi IVCombined Cycle Plant2004

EuskadourCross-border natural gas interconnection2005Strategy 3E 2000

1991-2000

Strategy 3E 20051996-2005

Strategy 3E 20102001-2010

Wind Energy Plan2000

1st CHP Plan1982-1987

1st Buildings Certificate1993

1st Landfill biogas plant1993

1st Wind Farm2000Gaviota field

Off-shore natural gas1986-1994

Gasification Plan in tertiary sector1988

Zabalgarbi PlantRSW Combined Cycle2005

Design of Energy Infrastructures Plan1995

1st Energy Policy Plan1982-1990

Actions Directed to Industrial Waste Management & Environmental Protection Basque Environmental StrategySustainable Development 2002-2020

Environmental FrameworkProgramme 2002-2006

Environmental FrameworkProgramme 2007-2010

ENER

GY

AN

D E

NVI

RO

NM

ENTA

L PO

LIC

YEN

ERG

Y IN

DIC

ATO

RS

1982 = Index 100

Ener

gy In

tens

ityEn

ergy

Mix

1990 = Index 76 2006 = Index 66 1990 = Index 601995 = Index 72

Mutriku OWC PlantMarine Energy2009 (P)

1st Bio-fuel Plant2003

CIC EnergiGuneEnergy Research Centre2007

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Economic Results2

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2.1 Main indicators

2,007,548986,02110. Visitors

44.92.5 (1997)9. Internet access % population

4600468 (1996)8. Quality certificates

4150617. Energy mix: oil %

66721006. Energy intensity

1.471.160.55. R&D expenditure % PIB

110.4110.74. Productivity Europe 15= 100

4.123.821.0Rate

40,525222,937182,914Number of people

Unemployment

66.548.4Rate

954,175712,673687,454Employment

994,700935,610870,368Workforce

3. Labour market

11694902. GDP ppp Europe 15 =100

23,60013,6356,1321. GDP per capita (current prices)

200619951986

THE FIRST GREAT ECONOMIC TRANSFORMATION

BASQUE COUNTRY

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2.2 Exports: Share and Sophistication

Export growth has been well above that of European countries and only surpassed by emerging

countries like India and China

The sophistication index of Basque exports has converged with that of the European Union

Sophistication of Basque Exports International Comparison

10000

12000

14000

16000

18000

20000

22000

24000

26000

1996 2004

Denmark

Finland

France

Germany

Ireland

Italy

Mexico

Poland

Rep. ofKoreaSpain

Sweden

Turkey

BasqueCountryUEmuestra

Source: Minondo 2007 (Orkestra)

EVOLUTION OF BASQUE EXPORTS COMPARED WITH OTHER COUNTRIES AND THE WORLD ECONOMY

1993-20061993= 100

0

200

400

600

800

1000

1200

1993 2003 2006

World

United States

Brazil

Europe

Germany

France

UnitedKingdom

Italy

China

Japan

India

BasqueCountry

Source: OMC, Eustat and own elaboration

CHINA

Basque Country

India

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2.3 Productivity and Labour Costs in the Industrial Sector

PRODUCTIVITY AND LABOUR COSTS IN THE INDUSTRIAL SECTOR (143 European Regions)

1995-2004

0

10

20

30

40

50

60

-10 10 30 50 70 90 110 130

Gross Value Added and Labour Cost at currente pricesSource: Eurostat and own elaboration

BASQUE COUNTRY 77 de 143

High ProductivityLow Productivity

Low labour Costs

High labour costs

Stockkolm

Ireland

Denmark

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2.4 European Innovation Scoreboard

0,000,100,200,300,400,500,600,700,80

RO LV BG PL SK PT EL HU LT MT ES CH EUS05

IT SI CZ EUS07

EE EU27 BE FR NL AT IE LU UK DE DK FI SE

BASQUE COUNTRY0 37

UEU27 0 45

The Basque Country occupies a higher position in GDP than in the innovation

index

0

50

100

150

200

250

300

0,00 0,10 0,20 0,30 0,40 0,50 0,60 0,70 0,80

Basque Country

Rumania

Sweden

Ireland

Luxemburg

AustriaFrance Finland

Denmark

Check Republic

GDPppp: UE 27= 100

EIS: UE 27=0,45= 100

USA

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2.5 The Second Great Economic Transformation

INNOVATION & KNOWLEDGE

Building the Information 

and Knowledge Society

Making The Basque Country a European reference in science and technology

Broadening Total quality for managing organizations

1 2 3

•Following on immediately from this, he put forward the aim of what became called the second great economic transformation of The Basque Country, based on three factors:

LEHENDAKARI (President) Juan Jose Ibarretxe, July 2001A society that has achieved the level of development that The

Basque Country enjoys today can no longer approach the future interms of the adoption of foreign technologies and cost advantages.

What it must do is tackle the challenge of innovation, quality and knowledge creation head on.

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New Strategy forCompetitiveness 2015

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3.1 Competitiveness Model

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3.2 Open Innovation

Principles

New Tools and programs

•Broad concept: Innovation is about creating value not necessarily creating things; it must include not only technological innovation (product and process), but also organisational and marketing innovation

•Results orientation: the aim is to transform knowledge into market value

•Cooperation: External R&D is an important source of innovation

•Driven by demand: following the needs of companies

• Innova Enterprise: an Innovation agenda for every business no matter what size or sector ( objective of 2.000 companies)

• Aldatu (Change): program for implementing non technological innovation

•Innova Cooperation for defining and driving the R&D needs of clusters and sectors.

•Etorgai: program for developing strategic innovation in cooperation

•New institutions (Innobasque, Ikerbasque, Basque Council) for intensifying cooperation, attracting talent and defining policy

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3.3 Technological Strategy

NEW FABRICATION SYSTEMS

SERVICES BIOSCIENCES NANOSCIENCES ALTERNATIVEENERGIES

ELECTRONICS FOR INTELLIGENT TRANSPORT

ECOINNOVATIONSUPPORTING THE PRESENT BUILDING THE FUTURE SOCIALINNOVATION

MANUFACTURING

HIGH EFFICIENCY

NEW MATERIALS

i- TOURGUNE

LANGUAGE INDUSTRY

BIOBASQUE NANOBASQUEENERGYGUNE ISTGUNE

INTELLIGENT ENVIRONMENT

ENVIRONMENT INDUSTRYBIODIVERSITYMETEOROLOGY

HUMANITIES, SOCIAL SCIENCES, ECONOMY

FOOD SECURITY

SOCIAL RESEARCH

ENVIROBASQUE

BUSINESS TRANSFORMATION

ICTs

COMMERCE

METEOROLOGYAND

CLIMATOLOGY

ENERGY

NEW SECTORS BASED ON SCIENCE AND TECHNOLOGYDevelopment of Scientific and Technological capabilities for the creation of new sectors

TRADITIONAL SECTORS

Transforming sectors in which our economy is specialized

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3.4 Size and Groups for competing in the Global Economy

An integral approach to business creation and growth

Entrepreneurship

Internationalization

Cultural change and training for nurturing entrepreneurship

Better support: BICs:, finance, seed capital Developing a model to foster entrepreneurshipProgram for entrepreneurial technological activities

with Global Presence

Fostering growth and Size

Strengthen financing mechanisms

New Capital Development Fund ( 400 Million Euro)

Encourage the creation of Groups and Develop existing ones

Raise companies awareness and accompany them in international expansionBroadening the foreign network of agenciesCreation of Basque Business Platforms in priority

countriesTraining people and promoting cooperation

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3.5 Internationalization of Basque Groups

• 61 Basque groups producing overseas: around 230 plants

< 55-1010-20>20

5Venezuela6India7Morocco8Czech Republic9Poland

11UK12Argentina13Italy15U.S.A.16Germany16France17Portugal22China26Mexico26Brazil

Main countries

Main Countries: Brazil, Mexico

and China

Main Countries: Brazil, Mexico

and China

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3.6 Strategic Objectives and Results

EU 27=100

2009: 131.4

EU 27=100

2006: 131.3

GDP

2004: 29.6

2006: 29.8

2004 R&D and EIS• Basque: 1.44 0.33• EU 27 1.84 0.45

• 2007• Euskadi: 1.47 0.35• EU 27 1.84 0.45

Employment

2004: 246,000

2006: 251,000

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FINAL REMARKS

1. The importance of Self-government and economic capacity of institutions

2. Globalization (economic integration) is good provided that the macroeconomic context is stable and sound

3. It is important to build on your own real capacities: people, industry and technology were, and still are, crucial for us.

4. An entrepreneurial Vision for the country is also needed: definition and deployment of a lot of strategies and plans with a broad participation of stakeholders is necessary for building a deep concept of competitiveness (social, sustainable competitiveness)

5. Institutional Wealth, accountability, public private collaboration and cooperation within the clusters and sectors

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REFERENCES

www.politicaindustrialvasca.net

www.euskadi2015.net

www.euskadinnova.net

www.euskadi.net

www.spri.es