Basque Country for Newsweek Magazine

The Basque Country: innovation & excellence Focus on industry and cooperation pays off for independent-thinking Spanish region

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ocated in the north of the Iberian Peninsula, the Basque Country is one of Spain’s 17 autonomous communities but, in ways both obvious and subtle, it does things rather differently from the rest of the country.

First, there is the language, Euskara, Western Europe’s only pre-IndoEuropean tongue, used by a third of the region’s 2.1 million people and unintelligible to Spanish speakers. Then, there is the landscape: limestone peaks, fertile valleys, and fast-flowing rivers that meet the Atlantic amid dramatic cliffs and idyllic beaches, a world away from Castille’s arid plains.

And, of course, there’s the food and drink: cod cheeks in pil pil, marmitako tuna stew, elaborate pintxos, young txakoli white wines and aged Rioja reds that are enjoyed worldwide, but don’t taste quite the same anywhere else.

The Basque Country is one of Spain’s most densely populated areas, home to cities like post-industrial Bilbao, seat of government Vitoria-Gasteiz, and Donostia-San Sebastián, 2016’s European Capital of Culture. It is one of its richest regions too, with a GDP per capita above the European Union average and an economy worth nearly €66 billion in 2015. It spends more per head than the rest of Spain on education and healthcare. And it has the lowest unemployment rate, with under 13% of the active population jobless compared to 21% nationwide.

The secret to its success is a long-term commitment to industry. While the rest of Spain rides the boom-and-bust rollercoaster of its tourism and construction-based economy, the Basque Country makes things we all need and re-invests in R&D to make them better and smarter than its competitors.

Manufacturing represents over 20% of its GDP, with sectors like metallurgy, petrochemicals, aeronautics, energy, and new technologies for healthcare leading the way.

“It is the base on which we have built our industrial fabric,” says Arantxa Tapia Otaegi, the Basque Government’s Minister of Economic

Development and Competitiveness. “We have been focusing on defining our strengths and diversifying to grow. And we are working on transforming knowledge. As the public sector, we make an initial investment to put things in motion and then we work with private investors to make them happen.”

Since the early 1990s, the Basque Country has fostered economic clusters to reinforce competitiveness through cooperation, supporting small and medium-sized enterprises in a collective drive towards innovation, excellence, and internationalization.

“Industries and manufacturing are long-term activities,” says Alexander Arriola, the Managing Director of SPRI, the Basque Business Development Agency. “They are difficult to create, but can last for many years. This is the added value of the Basque region. We have 22 clusters and we are pioneers in Europe with our policy.”

Capitalizing on decades of public and private-sector collaboration, clusters pay dividends for Basque businesses and society alike: “From the beginning, we tried to build a big social network to support the whole community: high quality education, healthcare, and social services for all,” notes politician and business leader Jon Azúa. “This enables growth and development in an inclusive way.”

Now, in line with its EU-backed Smart Specialisation Strategy and the Basque Industry 4.0 advanced manufacturing initiatives, the Basque Country aims to take its industrial prowess to the next level.

“Our focus on innovation aims to add value to our business culture, providing GDP gains and jobs,” explains José María Villate, the General Director of Innobasque. “The Basque R&D strategy is based on intelligent specialization, focusing experienced resources on areas with the highest returns on investment, and efficient responsiveness to the market’s needs.”

From L to R: Arantxa Tapia Otaegi, Minister of Economic Development & Competitiveness · Asier Alea, General Manager of Trade Promotion & Tourism, Government of Biscay · Gorka Urtaran, Mayor of Vitoria · Juan Mari Aburto, Mayor of Bilbao · Markel Olano, President of the Provincial Council of Gipuzkoa · Alexander Arriola, Managing Director, SPRI · Alberto García Erauzkin, President, Euskaltel and Chairman, Innobasque Middle row: Asier Atuxa, Chairman, Port of Bilbao · Joxe Mari Aizega, General Director, Basque Culinary Center · Andrés Arizkorreta, Chairman & CEO, CAF · Alejandro Aznar, Chairman, Marqués de Riscal · José María Villate, General Director, Innobasque · Jon Azúa, Founder, e-novating · Bottom: Juan Luis Cañas, Owner, Bodegas Luis Cañas · Euken Sese, Director, Fomento de San Sebastián · Juan Ignacio Vidarte, General Director, Guggenheim Museum Bilbao · Eneko Goia, Mayor of San Sebastián · Iñigo Ucín, Managing Director, DANOBATGROUP · Javier Sotil, President, MONDRAGON Corporation & Project Director Suzanna Howse produced this report

In collaboration with

San Sebastián: a feast for the senses Historic resort leverages culture & cuisine to develop an innovation-infused future

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he epitome of an elegant resort town that has gracefully transformed itself into a vibrant contemporary city, San Sebastián, or Donostia as it is called in the Basque language, is one of the two European Capitals of Culture in 2016, an honor it shares with Wroclaw in Poland. The city is now aiming to capitalize on its traditional strengths as a tourist destination to develop into an innovative cultural and technological hub.

Home to 186,000 inhabitants, the capital of Gipuzkoa province has long been celebrated for its Belle Epoque charm, from the promenade along iconic La Concha beach to the old-school amusements atop Monte Igueldo. Over the last two decades, San Sebastián has undergone a renaissance, adding new attractions, such as the Kursaal Congress Center and Auditorium and the We see potential for renovated aquarium in the Palacio growth, but it has to del Mar, that have boosted visitor be sustained and sustainable.” numbers.

Eneko Goia, Mayor of San Sebastián “Our tourism vocation dates back 200 years,” says the city’s Mayor, Eneko Goia. “We see potential for growth, but it has to be sustained and sustainable. Hotel capacity is limited in the city, although it is growing.

We need to do this prudently, working on excellence and quality of service.

We are trying to attract visitors with cultural interests linked to gastronomy.”

San Sebastián boasts the world’s second-highest concentration of Michelin stars, but you can also sample much of the region’s delicious fare in bite-size portions in the old town’s numerous back-street bars. At the Basque Culinary Center (BCC), opened in 2011 by top local chefs and Mondragon University, 500 students from 25 countries are studying the secrets of Basque cooking, food science, and innovation, to share their knowledge with the world.

“Our gastronomy is a great asset in our country brand,” believes Joxe Mari Aizega, the BCC’s Managing Director. “Most people know the Basque

THE SMART FACTORY

Country for its cuisine and many of the three million visitors we had last year came because of it. We analyzed the value chain and found it represents 10% of GDP.” At the same time, the development of cutting-edge business centers, like the Gipuzkoa Science and Technology Park in Miramon, has raised San Sebastián’s profile as a leader in industrial innovation: “The knowledge to

View of the iconic La Concha beach in San Sebastián.

create added value is here,” Mayor Goia notes. “With our four universities the city must also play the role of a facilitator in innovation. We try and work as a lab for our companies: for example, the first electric bus made by a local company operates in our public transport system. As the image we want to project is quality of life, this will naturally increase with innovative projects.”

Fomento de San Sebastián is a municipally owned corporation that has strived to promote precisely that kind of initiative for more than a century. Today, it continues to contribute to the economic and social development of the city, supporting emerging productive sectors through the local clustering model, and providing grants and training to foster the next generation of entrepreneurs.

The Basque Country, at the forefront of Europe

“San Sebastián is a city that has innovation embedded in its DNA,” declares Euken Sese, the General Manager of Fomento de San Sebastián.

“We have grown and developed around tourism. Since 2000, we have gone from having four technological centers dedicated to applied research to thirty-four today. Our GDP growth rate is 2.7%, higher than the European average. The trigger has been the attractiveness of the city and this should be our path for the future.”

“We want to attract talent to San Sebastián, create networks and work together with cities all over Europe and in a more open way with the world,” confirms Pablo Berástegui, the Managing Director of Donostia/San Sebastián 2016. “The more people who discover our culture, the better.”

The Basque Culinary Center.

Gipuzkoa: the destination of choice for forward-thinking industrial investment

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he smallest province in Spain with a population of just over 715,000, Gipuzkoa is also one of the country’s richest, boasting a GDP per capita rate well above the national average. It is also a proudly Basque region, where almost half the population speaks Euskara, the Basque language, and keeps local traditions alive. And, according We are committed to Markel Olano, the President of the to generating Provincial Council of Gipuzkoa, it has developed an innovative industrial wealth, innovation and economic model, based on a firm competitiveness.”

Markel Olano, President commitment to R&D. “We have some well-developed Provincial Council of Gipuzkoa areas in the advanced manufacturing sector,” Olano explains. “We have a very important machinery and tool industry. In this field, Gipuzkoa is the strongest area in the Basque Country and within Spain. Nano-technology and bioscience are also important areas of development.

We have small and medium-sized companies with strong AAFF_90X75_SURF_ENG copia.pdf 1 25/5/16 9:36 R&D programs.”

For its part, the Provincial Council, in tandem with the Basque Regional Government, is working to encourage an ecosystem based on innovation and knowledge: “We have more than 5,000 researchers, which is a lot for such a small territory,” Olano points out. “We would like the research to be applied towards new industrial products and we have a research institution called the Donostia International Physics Center, which is on the frontline.”

Established in 1993, BIC Gipuzkoa works with the province’s technology centers, universities, and public and private-sector bodies to develop new businesses and a culture of entrepreneurship. Serving as an incubator for start-ups and a valuable source of support for existing companies looking to be innovative, BIC Gipuzkoa has helped dozens of fledgling firms take flight, providing subsidies and fostering collaboration.

At the end of 2015, the Provincial Council launched an Economic Reactivation Plan, which will see €200 million invested over the next four years to help promote additional overseas investment: “We want to attract financing for our future development,” Olano says, “and we need to be proactive to create relationships in Europe, the US and Latin America, but also India and China. We are committed to generating wealth, innovation and competitiveness.”

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Bilbao and Biscay: where art imitates life Former industrial powerhouse is reborn as business and tourism gateway to province

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ome to more than half the Basque Country’s population, the Province of Biscay was historically the industrial heartland of the region. The discovery of rich veins of iron in the mountains surrounding the provincial capital, Bilbao, in the mid-1800s attracted capital from overseas to fund Spain’s first industrial revolution and made the province one of the wealthiest in the country, fueling the development of financial and industrial empires.

By the 1970s and ‘80s, however, Biscay was suffering, caught up in a storm of cheaper competition from overseas steel producers, labor struggles, and the consequences of conflict caused by the separatist group ETA seeking independence. The region’s industrial giants fell into decline, Bilbao’s once bustling port lost much of its traffic, and the city and the province’s fortunes dwindled as quickly as they had risen a century before.

Then a deal signed in 1992 between the Basque Government and the Solomon R. Guggenheim Foundation in 1992, marked the beginning of Bilbao’s and Biscay’s renaissance. The Frank Gehry-designed Guggenheim Museum Bilbao, which opened in October 1997, was just the first of a succession of urban renewal projects—such as the Euskalduna Conference Center and Concert Hall, new metro and tramway networks, and Abandoibarra port district regeneration—that have transformed the city into a modern business center and the motor, once again, of the province’s growth.

“Bilbao went from being a gray Bilbao has become industrial city to become one related a city of services, to services, culture and knowledge,” culture and knowledge.” says Juan Mari Aburto, its Mayor.

Juan Mari Aburto, Mayor of Bilbao “We will no longer see heavy industry here as in the past. Advanced services will be dedicated to serving companies and industries. Some of the areas that we are defining are: digital economy, logistics and distribution, applied technologies in the health sector, tourism, and urban solutions.”

In February 2015, Bilbao became the first city in the country to be awarded Smart City status by AENOR, Spain’s certification association. Initiatives like Bilbao Berrikuntza Faktoria, a joint venture between the city council and Mondragon University to promote entrepreneurship and innovation; the planned redevelopment of the Zorrotzaurre peninsula into a ‘Creative Island’; and the city’s varied cultural calendar, featuring major art exhibitions, music events, and festivals year-round, are all contributing to make Bilbao increasingly attractive to investors, professionals, start-ups, and tourists alike.

The Guggenheim Bilbao has become the symbol of Bilbao for the world.

“Last year, we had over 1.1 million visitors,” notes Juan Ignacio Vidarte, who has been the Managing Director of the Guggenheim Museum Bilbao since its inauguration. “Bilbao put the museum at the center of its strategy to transform itself and it has helped to transform the economic and productive fabric of the city.”

“There was no tourism sector in Biscay before the Guggenheim,” admits Asier Alea, General Manager of Trade Promotion and Tourism, Provincial Government of Biscay. “Before 1997, the weight of tourism in the overall economy was below one percent. We went from under 200,000 vistors a year to close to 1.5 million this year. In terms of GDP, tourism’s share of the economy is now close to six percent.”

While some 80% of visitors to Biscay limit their stay to Bilbao for now, Alea says, the province possesses a host of cultural, historical, gastronomic and natural attractions that are well worth discovering. There are another 29 museums to explore, from the UNESCO World Heritage-listed Santimamiñe Cave to the nearby Forest of Oma, the brainchild of artist Agustín Ibarrola, and from the moving Gernika Peace Museum to the Euskal Herria Museum in the same town, which traces the history and heritage of the Basque people. Biscay’s dramatic coastline and natural reserves, like the UNESCO Biosphere Reserve of Urdaibai, are also must-sees.

At the beginning of 2013, the ‘Bilbao Bizkaia, Be Basque’ brand was launched to promote both the city itself and Biscay as attractive destinations not just for tourists, but also for talent. Positioning the province as a “boutique territory with a premium offering”, Alea explains, the brand reflects its inclusive attitude, easy-going lifestyle, and enviable quality of life: “Whoever wants to ‘Be Basque’, can be,” he declares.

BAY OF BISCAY:the Bay Area of Europe They say that travelling is not just visiting places, it is letting those places amaze you.

They say that our sea is different, it is not called the Bay of Biscay for nothing.

There must be a reason.

Vitoria-Gasteiz and Alava: a green and vibrant land This inland province is home to one of just three areas that produce Spain’s Rioja wines

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egularly ranked among the cities with the best quality of life in Spain, Vitoria-Gasteiz is the historic capital of Alava Province and the present-day capital of the Basque Country. It serves as the seat of government for the Basque Autonomous Community and was awarded the title of European Green Capital in 2012 by the European Commission, but, curiously enough, the city and its surrounding province remain among the least-visited and less well-known places in the entire region.

The city’s Mayor, Gorka Urtaran, is on a mission to put Vitoria-Gasteiz on the map and has a long list of goals for his mandate through 2019: “We want Vitoria-Gasteiz to be a city where we have high living standards, guarantee diversity, generate stable employment, create wealth, enjoy efficient transportation, and where we take into account economic, environmental and social sustainability,” he says.

Facing inland towards the rest of Spain, rather than out to the Atlantic Ocean, landlocked Alava is the Basque Country’s biggest province by territory, but its smallest by population. It has few more than 320,000 residents, most of whom live in and around its capital. In the south of the province, the chalk and clay soils on the left bank of the Ebro River, Spain’s second-longest, provide fertile ground to grow the grapes that make up some of the world’s finest wines from the Rioja Alavesa area, like the award-winning reds from Bodegas Luis Cañas.

The family-owned brand has been producing and marketing its wines under its own labels since 1970 and doing things very much its own way: “One of our major innovations has been looking back at the past,” says Juan Luis Cañas, the owner of Bodegas Luis Cañas. “We are taking

Marqués de Riscal: from local to global

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or over a century and a half, Marqués de Riscal has been making high-quality reds in Elciego, in the Rioja Alavesa wine-growing region, adding whites from the Rueda region in 1972 and becoming one of Spain’s most-recognized brands along the way. In 2006, it opened The City of Wine, a spectacular winery and luxury hotel complex designed by Frank Gehry above its historic cellars, where it now welcomes growing numbers of wine lovers every year.

“We already have close to 100,000 visitors,” says Alejandro Aznar, the brand’s Chairman. “We chose Gehry to help us make the leap from the 19th to the 21st century.

We see ourselves as a Basque, Spanish, European and global company, because our business is www.marquesderiscal.com to sell wine worldwide.”

a traditional approach to viticulture, where everything has value. Selling wine, progressing as much as we can, and being considered a winery of quality: this is the position we want to be in.”

Bodegas Luis Cañas exports its wines to 40 countries worldwide, selling much of its production to Europe—especially Germany, the United Kingdom, and Switzerland—although 30% of its market is outside the EU. It employs four enologists and an engineer to keep its vineyards in optimum conditions and works with experts from the University of Navarre, leading local wine schools, and technology centers across the Basque Country.

Basque industry: technology & internationalization Leading companies in the Basque Country spend well above the Spanish & European Union average on R&D

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ne number explains why the Basque Country continues to be at the forefront of industrial innovation: 2.09%. That’s the percentage of GDP the region invests in R&D, according to SPRI, 70% higher than the Spanish figure of just 1.23% and above the European Union average of 2.03%. As part of its Europa 2020 growth strategy, the EU fixed a goal of 3% of GDP to be reinvested in R&D and innovation by the end of the decade. While the Basque Country still has some way to go, many of its largest companies already surpass the target by a significant margin.

“Of all our investments, 10% goes into R&D and innovation,” confirms Alberto García Erauzkin, Chairman of regional telecoms operator Euskaltel and Chairman of Innobasque, the Basque Innovation Agency. “We are a tech company and need to be on the cutting edge. We have always been innovative and were born from convergence. In 2015 we acquired R Cable & Telecomunicaciones Galicia SA making us the leaders in telecommunications in northern Spain, reaching a market of five million people.”

Established in 1995, Euskaltel provides quad-play cellular and fixed telephony, broadband Internet and digital television services, leveraging its 364,700-kilometer fiber-optic network and proprietary 4G mobile coverage to reach hundreds of thousands We were born of homes and businesses across the region. from convergence It has invested close to €1.9 billion over the and need to be on the last 20 years and has spent more than €100 cutting edge.” million on R&D in the last decade alone.

Alberto García Erauzkin “The European digital agenda for 2030 Chairman, Euskaltel states that every citizen should have 30MB at home,” García Erauzkin says. “With 85% coverage, we are talking about universalizing 350MB. We are already working on fifth-play, adding home automation and safety, and sixth-play around Internet-based leisure and gaming.”

At Euskaltel, cutting -edge communications are a must.

Another Basque leader in industry and innovation, in this case in the rail sector, is CAF. Founded over a century ago, CAF today sells everything from turn-key transportation solutions to rolling stock such as trams, subways and high-speed trains, and from traction and communications systems to maintenance services. It only began to sell outside Spain in 1992, but already 90% of its revenues are generated overseas from 35 territories. Having won major projects in the UK like the Northern franchise trains and the LondonScotland sleeper, CAF has an order book worth €5.5 billion and is aiming to earn €1.4 billion in 2016.

“We spend 4% of our revenue on R&D,” notes Andrés Arizkorreta, the Chairman and CEO of CAF, “and this is a constant, regardless of the economic climate. We now want to take the jump into railway systems, like signalling, energy acquisition and global project engineering. We need to learn to build, operate and finance systems and this means the company needs to invest in new things beyond our traditional area of expertise.”

CAF is currently focusing its R&D innovation on signalization, Arizkorreta says, having developed its Auriga integral solution for the

European Railway Traffic Management System for major railway lines. At the same time, conscious of the importance of efficient energy use, it is exploring ways to harness electric power technologies and energy accumulation techniques to make more rational use of resources and cut costs, working with cities like Seville, Birmingham and Luxembourg to resolve the mobility challenges of the future.

The Basque Country is the EU’s third-largest producer of machinery and equipment, contributing €1.18 billion annually to the region’s economy.

According to SPRI, the almost 100 companies in the sector collectively spend €60 million a year on R&D, although its number-one player, DANOBATGROUP, We need “dedicates around 10% of our income to to learn to build R&D,” says its Managing Director, Iñigo Ucin. systems beyond our DANOBATGROUP is wholly owned by traditional area of MONDRAGON Corporation, the world’s expertise.” largest industrial cooperative, which reinvests Andrés Arizkorreta 9% of its revenue in R&D, employing 1,600 Chairman & CEO, CAF people in 15 centers to serve the needs of its 257 companies that export to 150 countries worldwide, generating around €15 billion in annual sales: “Research has historically been key for us,” insists Javier Sotil, MONDRAGON’s President.

Going global and thinking big, sector by sector Automotion—Antonio María Pradera Jáuregui, Chairman, CIE Automotive: “We define ourselves as a ‘multi-local’ company. Even though we are Basque in our philosophy, culture and entrepreneurship, we are a global company. Right now, 55% of our billing corresponds to Europe, 25% to NAFTA, and 20% to emerging markets in Asia and Brazil.”

Transportation—Asier Atuxa, Chairman, Port Authority of Bilbao: “Our strategic plan is to improve infrastructure to increase our area of influence. We want to maintain our position as the biggest port in the

The Port of Bilbao is a key driver for the economy.

north of the Peninsula; 95% of our traffic is import-export. We have awarded a €125-million construction project for a new quay.”

Energy—Asis Canales, Iberdrola CPO & Basque Country Deputy Director of Purchasing and Insurance: “We invest annually €200 million in efficiency, sustainability, and energy-based products and services, such as smart networks and renewable offshore energy. We have a fund to develop new ventures called Perseo, to finance start-ups and technologies.”

Aeronautics—Ignacio Mataix, CEO, ITP: “We have constantly been above 10% of R&D investment on our revenues, making us the numberone industrial company in Spain. Our investments in low-pressure turbines for large trans-Atlantic aircraft have given us a 50% market share. Every other plane you fly will have ITP turbines.”

Technology—Iñaki San Sebastián, CEO, Tecnalia: “The only way Basque companies can differentiate themselves from their competitors is in added value and innovation. We are a non-profit, private research organization, funded 50:50 public and private. Our mission is to transform technology into GDP and improve quality of life.”

Toolmaking—Aner Garmendia, Managing Director, EGA Master: “Real innovation comes from the interaction between companies and the market or the final user. By learning about their problems and needs, we can develop new products or improve existing ones. Investing in safe tools and products is profitable for clients in high-risk environments.”

Concentrating on Innovation Arantxa Tapia Otaegi, Minister of Economic Development & Competitiveness of the Basque Government How important is investment in innovation to the continued competitiveness of the Basque economy?

We have built the Basque Country’s industrial policy on innovation over the last 30 years. Our institution has two main axes: applied technology and innovation to generate new products, processes and services and the internationalization of our industry to promote growth.

How significant is the science and technology sector in the Basque Country?

This sector represents about 2% of the GDP. Three quarters of this comes from private investment and the remaining quarter is from public investment, although due to the recent crisis, it is now about two thirds private and one third public. There are about 8,000 researchers working for the Basque Network of Science Technology and Innovation either on a full-time or part-time basis. There are also industrial R&D units that are contributing to this sector and great efforts have been made to maintain and develop these human resources in spite of the crisis.

What are the strategic aims of the Science, Technology & Innovation Plan 2020 (PCTI)?

There are two important aspects. Firstly, our plan responds to the Smart Specialization Strategy, RIS3 issued by the European Union. The energy sector and we have been working with the European Vanguard idea is to concentrate on our strengths Initiative, which started with seventeen regions and is continually We need in the technology and industrial growing. Our activity is based on clusters that work at an interregional international relationships to sectors and use them to diversify and level and we are trying to define projects to bring us all together. One grow. One important of the other pilot groups will be focused on energy develop further.� sector is advanced efficiency, especially in public buildings. The aim manufacturing, which is to develop a zero carbon strategy, which will includes aerospace and railway manufacturing, also allow us to rehabilitate homes through energy including machinery and machine tools. Secondly, efficiency. Although we are still a little behind in of GDP is made the energy sector is also very important especially bioscience - because the group is carefully trying to up of science and for renewable energy, smart grids and efficiency. identify the path to take - we believe there is huge The third important sector is bioscience, especially potential in that sector. technology for human health. We are working on transforming What are the competitive advantages of the knowledge into industry and we need first-rate Basque Country for foreign investors? research to be carried out on these areas. Last but Our administration is extremely accessible and not least, we want to transfer knowledge as quickly as possible. The largest percentage of our technology Number of employees we are also a very friendly and open country. Our investment should be earmarked for these three at Basque Network technology network has developed over a long areas. of Science Technology period of time which is an additional key factor. We need international relationships to develop further. and Innovation Why did the government choose these three There is a great network of small and mediumstrategic priorities? sized suppliers, which means that multinational Advanced manufacturing has now evolved into companies can get everything that they need for their Basque Industry 4.0 which encompasses all IT, company to work; services are good and procedures communications and management systems and new are easy. Although land might not be cheap, the business, etc. We have pilot groups for different companies who come here are not looking for cheap that the Basque areas. The clusters, universities, research centers and land, instead they are looking for such things as our companies are working on various sectors for which Country has followed independent fiscal policy and ease of doing business. we provide support. They have already defined All these factors make the Basque Country different innovation policy seven initiatives. We have another pilot group in the and attractive.

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Basque Industrial Sector Investing in Innovation and Internationalization Alexander Arriola, Managing Director of the Basque Business Development Agency (SPRI) Why is the Basque economy outperforming the rest of Spain?

Has Euskadi exited the crisis?

We are different from other regions in Spain because we have a strong, industrial economy. Up until 2008, industry accounted for 28% of our GDP. With the recession, this percentage decreased slightly but the Basque Country remains a very industrial region.

What is the economic outlook of the Basque Country?

We are optimistic. We forecast that we will be in 2016 among the fastestgrowing European regions. Our industrial GDP will also increase slightly although we are working on further increasing it. However, our main challenge remains the unemployment rate. It is now just under 14%, which is too high, and it is a priority concern.

How internationalized are Basque companies?

It depends on their sector of activity and on where they are located.

Overall, we export 33% of our GDP. We have defined five strategic countries, which are the U.S., Mexico, Germany, China and India.

Basque 4.0 There is a lot of talk about the will help us improve slump in the Chinese stock market, but I know this country quite well our processes having worked there for seven and consequently years, and I also regularly meet with our revenues and Basque companies operating there. benefits.�

The climate remains overall bullish: they are opening new factories and making new investments. As for India, it is a key country for us, and we are very hopeful about the growth of Basque companies over there.

How important is innovation for the economic development of the Basque Country?

We invest about 2% of our GDP in research and development, which places us among the top European investors. But we want to improve that percentage.

Innovation and internationalization are two pillars of our development strategy and we support Basque companies as much as possible in this respect.

What are you doing to improve knowledge transfer between technology centers and the private sector?

We have a dense network of R&D technology centers, employing more than 3,500 people. A few years ago, the government launched a study that revealed a lack in knowledge transfer between these technology centers and private companies, most of whom are SMEs. This led us to design a modernization plan to change the working processes and ensure that there are more transfers. It is a bit of a cultural revolution that takes time, but change is already palpable.

How about the innovative clusters in Euskadi? Did you reorganize them as well?

4,000+ Basque business projects abroad

Indeed we did exactly the same reorganization as for the technology centers. We have 22 clusters and we can be considered as pioneers in Europe with our cluster policy. We are giving them targets, and have set three main priorities: internationalization, R&D and representativity, meaning that each cluster must be representative of its sector, be it automotive, machine tools, aeronautics, TICs, etc. The Basque government’s subsidies depend on these criteria.

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What progress are you making in another priority area, namely advanced manufacturing, or industry 4.0?

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Our strength is that we are already very industrialized: we have supply chains, and very skilled, knowledgeable people in all aspects of manufacturing, from mechanical to electrical and electronics. We are in this respect comparable to Switzerland, a country that is highly specialized in nanomechanics, with which we have close relations. Industry 4.0 is a new area in which we want to start working, and we are already making important steps in this direction. We call it Basque 4.0 and it will help us improve our processes and consequently our revenues and benefits.

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Creating a platform for strategy and competitiveness Jon Azua, President of Enovating Lab What are the main strengths of the Basque Country in the global economy?

The Basque Country defined its strategy 30 or 40 years ago when it achieved self-government status. We decided to introduce innovation into all our processes, business models, and technology, whilst maintaining the core values and activities that the manufacturing sector had always enjoyed.

We also understood that although globalization is important for market access, the local effect is essential for competitiveness. We therefore realized that a cluster-based economy was key to break down the traditional set-up of sectors and build connectivity between different economic activities.

We also realized the importance of not separating economic and social policies. Social policies are not only about providing justice or equity, but are also key for competitiveness. Providing high quality education, healthcare, social services and minimum salary for citizens allows growth and development in an inclusive way. Today, all mindsets are moving in that direction. I would therefore say our competitive advantage is the previous long-term work that the Basque Country has undertaken to build the future.

How have clusters transformed the economy over the past 25 years?

Clusters are not just about organizing the economy. They require a new mindset and way of doing things. We had to understand the territory where we work and put our efforts into microeconomics. Macroeconomics are We work on naturally important and relevant, but the decision-making takes place outside a wide range of projects, boards of the Basque Country. The important thing was to create microeconomics of directors and for the micro and SMEs as 90% of our advisory boards economy is made up of this type of around the world.� company. It is very difficult for them to be international, carry out research and reach the capital markets. Clusters make all of this easier; they change the business models of these companies and allow them grow.

Michael Porter, the renowned economist and expert in clusters, has stated that the Basque Country is the best place in the world for clusters, because we have really adopted the necessary strategy and philosophy.

and Competitiveness at Harvard. We strategically created an advisory board with key international people who have a different outlook than the people in the Basque country. They make and publish a lot of different research which historically hasn’t been done in the past.

How can the Enovating Lab help the Basque country in competitiveness and what kind of projects have you worked on?

The Enovating Lab was created in 2002. It is a platform for ideas, original development and competitiveness. The Enovating Lab Academy is where we learn from the key think tanks, institutions and universities. The Enovating Lab is a member of the ISC, Harvard University, World Economic Forum and we contribute to research and to sharing information across the world. It is not a consultancy, but it participates on international advisory boards.

Since we began, we have been involved in many different projects and clients. We work on a wide date of creation of range of projects, boards of directors and advisory Enovating Lab boards around the world in industries such as biotech, energy, health, financials, technology, manufacturing etc. We also take part in nonprofit organizations, international institutions and governments on matters including competitiveness strategies, cluster development, S&M Companies, of economy health coverage and venturing. We have also worked made up of SMEs and on R&D share collaborative initiatives. Interacting with international key players provides a wealth of micro-companies knowledge for all involved.

2002

Can you tell us about the ORKESTRA Institute?

We created ORKESTRA because we needed an independent institution to work in three main areas; to research our competitiveness, to provide instruction and framework, and to create a real impact on Basque society. It is a very international institution and related to a whole network of think tanks and universities which share and learn together.

Michael Porter is part of the Institute for Strategy

90%

Basque Country Appeals with Unique Culture and Gastronomy Arantza Madariaga, Director General of Basquetour San Sebastián, the Basque Country capital, is European Capital of Culture for 2016. How does this benefit tourism in the region?

Being European Capital of Culture places us in a position where we have always wanted to be: culture has always been very important to us and we have our own, very specific culture. The program designed for the event is very rich and focuses on coexistence, with a strong social dimension. Like all international events, this will surely be very positive for San Sebastián and the Basque Country as a whole, even though San Sebastián is already quite renowned in part because of its film festival, which is one of the most important in the world.

What is the ratio between international and domestic tourism in the Basque Country?

Overall, between 55% and 60% of visitors come from Spain and the rest from abroad, with variations according to the seasons and the cities.

For example in San Sebastián, international tourism reaches 40%-60% all year long. All international markets are interesting but our top priorities are Gastronomy France, our neighbor, the UK, Germany is deeply rooted and the U.S. For these markets, our efforts aim in particular at increasing here, which airline connections. Last year, British explains why we Airways opened a route between London have a record and Bilbao, which serves customers number of not only from the UK but also from the Michelin-starred U.S. Apart from online and traditional marketing, we carry out activities in restaurants.” our target countries. In the U.S., we will be promoting our tourism in Washington D.C. during the Smithsonian Folklike Festival, which is held each year outdoor on the Washington Mall. The dates this year are 29 June to 10 July. We also have attended tourism fairs in New York City in the past two years.

quality of our products and we treat every step of the value chain with great care, from the raw products to how food is presented to customers.

On another level, we have a world-famous culinary university, the Basque Culinary Center, that has some of our most renowned chefs on its board. We believe our gastronomic offer is unique in the world.

2.2

You just revamped your website...

Indeed. It is available in Euskera, Spanish, English, German and French. Some material is also available in Russian, Japanese, Chinese and Arabic. Euskadi is a small destination but it has a very diverse offering, and the website reflects this diversity.

The Basque gastronomy is well known and the region has a record number of Michelinstarred restaurants. Is it an important facet of your tourism offer?

Gastronomy is deeply rooted in the Basque Country; it is an essential part of our culture. It is not just that you can eat well here; you can eat well in a lot of places. Gastronomy is really part of our DNA; it runs in our veins, and we want visitors to experience this.

We have a number of Michelin-starred restaurants but also scores of others at all price ranges, including very affordable ones. We place a lot of importance on the

million

people live in the Basque Country

1 million visitors

each year at the Guggenheim Bilbao

Oldest

The Basque language is the oldest in Europe

What has been the impact of the Bilbao Guggenheim Museum on tourism in the city and in the Basque Country as a whole?

It has been huge, to the point that people here speak of “before the Gugggenheim” and “after the Guggenheim” when they refer to any given period of time. Bilbao was an industrial city up until the 1980s, when it was hit hard by the general movement of deindustrialization that affected many industrial regions in Europe. It was a wealthy city that saw its largest source of wealth disappear. Local authorities had this vision of doing something new to revive the city and someone thought of bringing the Guggenheim Museum here. It was a seminal moment in which the old, industrial Bilbao “died” and a new city was born as a tourist destination focused on services. Bilbao has since become a world-famous model for urban renewal. The Guggenheim placed us on the map of the world.

European Capital of Culture Ambitions to Become Innovation Hub Eneko Goía, Mayor of San Sebastián San Sebastián is European Capital of Culture for 2016. What will be the impact on the local economy?

It is difficult at this stage to quantify the economic impact of being European Capital of Culture. What is certain is that it will go a long way to raise awareness about our city and make it known for positive values.

Being named European Capital of Culture is in itself a way to increase coexistence and to promote local culture. So in this sense, it is bound to bring economic value because we expect more visitors this year, hence more commerce and tourism-related activities. This is the immediate benefit but there is also a long-term benefit for the image of our city.

How important is tourism for the economy of San Sebastián?

Tourism is already an important sector and it is growing. It is an old tradition here since tourism started in the 19th century. But over the past decades up until recently, the political situation and violence took their toll. Fortunately, now this negative backdrop has disappeared and we already see that occupation rates have been steadily going up for the past few years. Apart from the natural and architectural beauty of our city, gastronomy is also a strong draw. There is potential for growth in the tourism sector but we want to do it in a sustainable way. San Sebastián is not Benidorm! We have a permanent population of 186,000 and we are aiming at attracting quality tourism linked to culture and gastronomy rather than mass sun-and-beach tourism. Our priority is the excellence and quality of service in the hospitality sector.

You said that San Sebastián “wants to be the city of knowledge and innovation.” R&D already accounts for 5% of the jobs here. What do you do to support innovation and R&D?

our role as a test lab and to push for schemes that will transform San We are the capital of the region of Gipuzkoa, in the Basque Country, a Sebastián into a smart city by involving both the public and the private region that is very industrialized. Innovation and R&D sectors. are essential for us because all the studies show that What plans do you have to digitalize the adminthe best-performing istration of the city and make it a smart city? countries and regions As far as digitalization goes, we have many projects The city acts are those that invest a because clearly, we need to progress in this area. We significant part of their people live in as a facilitator have a plan to provide more services through digital GDP in those areas. We San Sebastián and a test lab platforms, and we also want to increase transparency, have developed urban for innovative an area in which digital technologies can really bring zones dedicated to incompanies in an advantage. novation such as the sectors such as As regards the transformation of San Sebastián into Technological Area of a smart city, we are working on several fronts. There transportation.” Miramon. We also have city in the world are ongoing projects in public transportation, in the four important univerwith the most parking system – such as mobile payment –, in smart sities. The role of the city is to be a facilitator, for example by making it as Michelin-starred lighting and meters control, and in energy savings in the historic center. easy as possible for companies to acquire land here. restaurants Furthermore, we act as a laboratory for local comWhat will be the legacy of being European panies. For example, the city public transportation Capital of Culture? system uses electric buses made by a local company, We hope it will show how culture can help us to and we are starting a driverless bus service connected coexist peacefully as a community, and that the world with the city transportation system, which circulates of local jobs will know San Sebastián for positive values. We want around the Miramon Tech Area. In June we established linked to R&D to show that although we do not forget our recent a Department for Innovation and New Technologies history, we have now moved on. to manifest our deep commitment but also to increase

186,000 2nd 5%

Citizens at the Heart of San Sebastián Capital of Culture’s Program Pablo Berástegui, Director General of San Sebastián 2016 What are your expectations for this year in which San Sebastián is European Capital of Culture? And what impact has it already had on the city?

We are not looking for short-term impact so I can’t say yet. Our project for this year as Capital of Culture is long term: everything we do has long-term objectives. The essence of our project is firstly to build on San Sebastián’s strong local Basque culture, on what we already have, and secondly to promote culture among its citizens as a tool to learn to live together better, to be more respectful, more benign, more eager to get out of our comfort zone and experiment new things. It is a very ambitious and political project that goes beyond culture and tackles the issue of how to live together in society. It is of course particularly relevant here in the Basque Country.

So the project in essence is about using culture to overcome the violent past of San Sebastián and the Basque Country?

Yes, we hope to encourage people to look at each other from each other’s perspective; it is about empathy. There are a lot of conflicts and sometimes it is easier to solve them through a representation rather We want than facing them directly. For example, in theater, we will use the ‘Theater of to promote culture as a means the Oppressed’ methodology that was developed in South America in the to strengthen 1970s, whereby the public directs coexistence among the actors of the play in a situation all the components where a conflict needs to be solved.

The audience cannot leave the theater of the Basque before a solution has been reached. It society.” is one way of promoting coexistence.

Learning to walk in someone else’s shoes to understand where they come from and why they do what they do is the unifying idea of our whole project and I believe the reason why our bid was chosen.

How do you evaluate the economic impact on San Sebastián of this year’s event?

The project was not designed to achieve an economic impact. Similarly, the main objective is not to generate more tourism or business. San

Sebastián is already a tourism destination and in economic terms, it has proven very resilient in the wake of the crisis. Rather, our project addresses other issues which are more difficult to handle: we want this city to be able to live with itself, to overcome the difficulties it went through in the past, and to be able to provide a space in which people who were against each other are once again able to look at each other in the eyes. We believe that in the long term, these cultural changes will bring economic benefits, but it is not what we are seeking as European Capital of Culture.

So in a way, the programming for Donostia/San Sebastián 2016 is a social experiment?

Yes you can say that. For example, cultural institutions that were used to working separately have been collaborating and taking decisions for the first time together. So apart from the program itself, which is very rich, what is interesting is how it was built. For example, we set up a Citizen Committee, whose members were selected by lot, and choose the projects to be included in the program. Our program is the means to the end, not the end itself: the activities are of course important but not as much as how they were built, and what can be achieved through them in the long term. We are a society that has suffered a lot, for a long time, and we need now to recover the lost connections between the different components of our society. It is also very important to address the issue of victims, whatever their origin or belief, but to do so with utmost respect. Ultimately, we hope this year will contribute to accelerating the recovery and normalization process of San Sebastián and the Basque Country.

San Sebastian: Innovation in its DNA Euken Sese, Director of Fomento de San Sebastian How important is innovation for San Sebastian’s development?

San Sebastian has innovation embedded in its DNA. By 1926 San Sebastian had the first automated telephone exchange and was one of the first cities in the whole of Europe to develop underground telephone wiring with copper wires. This is key to understanding who we are today and what we might become in the future.

The city’s culture has also been shaped by innovation and the International Film Festival and International Jazz Festival are now over 50 years old. Numerous sporting events also go all the way back to the beginning of the twentieth century. I think if you had to describe San Sebastian in terms of innovation, it would be that it is a city with a high quality of life.

In terms of the more traditional type of innovation - science and technology - in 2000 we had four technological centers and today we have thirty-four with over 5000 employees. We also have four universities. We also see innovation in the people that migrate to San Sebastian to start up businesses; international learning linked to innovation. We are also taking steps to transform the city’s tourism sector through innovation.

The attractiveness of the city is definitely the trigger and I believe that innovation Innovation should be our city’s path for the future. should be our I think we could be facing a potential city’s path to growth crisis caused by mass tourism. We are a small city and not able to receive the future.” too many tourists without a conflict of interests. We therefore need to shift from being an attractive city to an innovative one.

How important is the young generation for innovation in San Sebastian?

The new generation is looking for different things in life, and the type of companies that we see are being created as a result of this new take on life. These new sectors attract people with different core values, and so this social innovation has become very important for the city.

We are also promoting ‘talent return’ as we want to encourage people from our city who are now living all over the world, to return to San Sebastian. Some people don’t want young people to leave in the first place, but I believe people who have expanded their culture and education internationally represent a higher value for the city once they return.

How will San Sebastian as the European City of the Future 2016 raise the international profile of the city?

If you look at the last few European capitals of culture, the title has had an effect at a national level but only 5% of the European capitals generate attractiveness at an international or European level.

2016

San Sebastian is European Capital of Culture

5,000

employees in technological centers in San Sebastian

1926

San Sebastian installs first automated telephone exchange

Therefore, I think it is more important being San Sebastian itself than the culture capital, although it will help us reinforce our image. Compared to many of the cities that have had the honour over the past few years, San Sebastian is a city that is more solidly consolidated. In urban terms, when I speak to different architecture schools, they agree on the fact that we cannot do anything more here, because we do not have any more space.

How would you sum up San Sebastian’s image?

I would like people to have an image of San Sebastian as an innovative city which is full of talent. Our future lies on these two factors. We want people to come and share our quality of life. We want them to experience our day-to-day life with great food, markets, optimal sporting facilities and great infrastructure; a place where you can develop. These are our key assets, and we want to share them with the world, with people who want to come to San Sebastian to live and work with us.

Innovation in Basque Gastronomy Joxe Mari Aizega, General Director of Basque Culinary Center How international is the BCC? The Basque Culinary Center is a foundation which was created in 2009 and now promoted by the top Basque chefs along with the Mondragon University.

We have 500 full-time students split between the degree and the Masters program. International students from 25 different countries make up 27% of the degree program and 50% of the Masters. Our board is presided

by Joan Roca and includes such internationally renowned chefs such as Heston Blumenthal, Dan Barber and Rene Redzepi amongst others.

What is the Center’s main focus?

Our focus is on interdisciplinary training. All our students learn about cuisine, service, management, applied science and food culture and thus gain a wide knowledge of all aspects of gastronomy and food. This provides them with the skills to enter different areas of the culinary profession, either as chefs, restaurant managers or even researchers. There are many different possibilities and opportunities available.

What are the main features of Basque cuisine?

Basque cuisine today maintains a balance between tradition and innovation. The Basque Country only has two million inhabitants, yet you can find both traditional “pintxos” as well as some of the best avantgarde restaurants in the world such as Mugaritz or Azurmendi. This really demonstrates what a gastronomic region we are.

The majority of the three million visitors we received last year came because of our gastronomy. A recent study has showed that gastronomy represents 10% of Basque cuisine today maintains a balance our GDP, from production to distribution, restaurants and between tradition and related tourism.

innovation.”

What are the main research areas in the Center and how important is R&D in Basque Cuisine in general?

We have a research center called BCC Innovation and different research lines comprising of food and health, sensorial perception, customer’s behaviour, new gastronomic developments and design and technology.

We cover the whole area of innovation.

The Basque Country has been a pioneer in innovation since the 1970s when a group of chefs got together to start creating innovative cuisine. This culinary innovation experienced a real boom in the 1990s. We currently have four restaurants which hold three Michelin stars, and the sixth best restaurant in the world. If you look at the culinary excellence in the Basque Country in comparison to the number of inhabitants, the ratio is extremely high.

What is “Culinary Action!”?

Culinary Action! is our initiative to help promote entrepreneurs and new businesses. We want to support

young people who want to create new businesses and so Culinary Action! works as an incubator whereby we welcome 10 new companies every three or four months and help them turn their ideas into business plans and help them launch their companies.

What is the Basque Culinary Center’s World Prize and what are you looking for in the winner?

2009

Year of creation of the BCC

500

number of students at the BCC

25

number of countries from where students originate

This prize will award chefs who are involved in projects that are transforming the environment either through cooperation in education, sustainability, social projects, or by improving the quality of life of the communities of food producers. We believe that food can be a transformational tool and we want to acknowledge chefs who help make these changes. We are receiving nominations from all over the globe.

How do you envision the future of the Center?

We started the Center from scratch only five years ago, and it is now an international reference in gastronomical education, research and innovation.

We provide training that didn’t previously exist and we believe that this will continue to yield results. By concentrating further on research, we aim to be a center where new ideas for products, companies and services are brought to fruition. Our next challenge is to cooperate with other countries in Latin America and Asia who are just beginning this whole process of gastronomical innovation.

Gipuzkoa at the Forefront of Innovation Markel Olano Arrese, President of Gipuzkoa You took the helm of the Gipuzkoa Regional Council in June 2015. What are your immediate priorities, in particular regarding innovation and the promotion of a knowledge-based economy?

Gipuzkoa is mainly an industrial territory, although it also has an important service sector. All the counties of the region have a good balance in the industrial sector. We have small and medium-sized companies with strong R&D. Our strategy to develop our economic activity is to encourage the development of an ecosystem based on innovation and knowledge. There will be two lines of work. The first one will provide support to the science, technology and innovation network, which includes technology and research centers and universities, with specific support programs. The second line of work is to support innovation in companies, which is all the more important since many of them invest greatly in R&D. The Gipuzkoa Regional Council agrees with the definition that the Basque government has given regarding Smart Specialization strategy. There are three areas in relation to this: advanced manufacturing, energy and bioscience. In Gipuzkoa, we will back each of these areas. Furthermore, we have started an Economic Reactivation Plan with an innovative approach. We have a budget of about €800 million per year, with €50 million going into the action plan and €27 million directly supporting our industry.

What can the regional government do concretely to support innovation in companies?

We provide the institutional support to create a structure that fosters innovation, and we address most of the knowledge development needs.

However, we have to make a significant effort to obtain more results, in particular concerning patents, an area in which we are behind compared to European standards. This said, we are proud of our research center, the Donostia International Physics Center, which is really on the front line. It was inspired by the scientist Pedro Miguel Echenique, who used to say that basic research is also important and that We provide inhabitants we should not be the institutional support to create a always obsessed with results. We structure that fosters need to achieve innovation.” a good balance of Gipuzkoa’s GDP between applied invested in R&D and fundamental research. We also have centers dedicated to the creation of companies, in particular BIC Gipuzkoa, and I believe we should encourage further research that leads to the development of new products.

Another aspect in which public institutions play an important part in fostering research is in taxes. Taking people in the advantage of the fact the Basque territories have fiscal research community autonomy, we have given tax exemptions to R&D including 3,900 to encourage investment, and this has strong public researchers support.

707,000 2.23% 6,200

What are your priorities and strategy concerning foreign investment in Gipuzkoa?

We have a program called “Making Gipuzkoa” aimed at attracting capital and financing for our future development. The regions we are most interested in are Europe, the U.S. and Latin America, but we will also prospect in India and China. Many of the companies based here have branches and production plants all over the world, so we already have global relationships. What we need now is to develop them.

Furthermore, we want to make Gipuzkoa and the Basque Country known as an area for investment potential, where there is social and political stability and a strong industrial ecosystem. We want to get the message across to foreign investors that we now have political stability, and that we are committed to generating wealth, innovation and competitiveness for the local economy. Also, we want to showcase our advanced social model that is designed to fight against inequality.

Creating economic wellbeing for all Alberto García Erauzkin, President of Euskaltel What role does Euskaltel play in the Basque economy?

Euskaltel’s main role is to serve Basque society as an entrepreneurial and competitive company. We need to generate cashflow for our new investments which will create and maintain jobs, pay taxes and connect suppliers. The company’s main objective is to create economic wellbeing for everyone.

Innovation-wise, Euskaltel is focusing on two areas. One is to be innovative in what we are able to offer our customers, and the other is to be innovative in our social responsibility.

How does Euskaltel invest in R&D&I? We spend approximately 10% of all our revenues on R&D&I. This is well above the percentage spent by most other companies and countries.

We are a tech company and so naturally we always need to be at the leading edge of technology. We are as autonomous as possible in terms of our network. The fixed network belongs to us and we own as much of the mobile network as we can.We are leaders in telecom services in the Basque Country.. We are also the company with the biggest growth in mobile phones in the Basque Country.

You cannot buy or copy the global and differential experience with which we provide our customers.”

Is there anything new we can expect this year from Euskaltel?

The European digital agenda stipulates that every citizen should have 30MB at home by 2030. Euskaltel provide 85% of homes with access to broadband, and therefore our first main goal is to ensure that 350 MB is available universally.

Our second goal is to extend our WiFi network, and the third is to ensure that our television decoders have the capacity to retrieve shows from the previous week without storage.

10%

What are Euskaltel’s competitive advantages?

Technology can be bought, and products, services and prices can be copied. You cannot buy or copy the global and differential experience with which we provide our customers.

How did the economic crisis affect the Basque Country?

As a European region, the Basque Country suffered less during the crisis than the rest of Spain because of the weight of industry in our economy. This delayed the arrival of the crisis and made it easier to withstand.

How international is the ownership structure of Euskaltel since going public?

Although we have internationalized the share capital, we still have majority shareholders who maintain their roots in the Basque Country.

of revenues are spent on R&D&I

85%

Basque homes have access to Euskaltel’s broadband service

350MB

offered to every Euskaltel customer

As President of Innobasque, how well is the Basque Country positioned for new technologies?

Basque companies have approved a tech and innovation plan that takes us up to 2020. This plan defines our strategy for smart specialization in line with Brussels, and establishes certain areas of innovation to keep everyone headed in the same direction.

Why should investors come to the Basque Country?

The Basque Country is a land of opportunity. There are many macroeconomic differences compared to Spain, such as higher incomes and higher employment levels. We also have our own tax system and a higher percentage of industry in our GDP. Furthermore, in spite of their size, Basque companies have internationalized and are renowned throughout the global market. These companies offer an access to the international market at the same time as staying close to their roots and the local market. This gives them a competitive edge and that is proving very attractive to investors. It is a great country to invest in.

Innovation in Railway Systems Andrés Arizkorreta, President of CAF What is CAF’s business model?

We are committed to the development of technology, innovation and new sectors. We also plan to continue our nationalization of the company.

Ninety percent of our activity is outside of Spain and we would like to take this internationalization a step further so that we become more embedded in the culture of the countries where we are present.

What is the importance of R&D&I in CAF’s success?

The company spends 4% of its sales revenue on R&D&I, and this is a constant regardless of the economic climate. We now want to take the leap into producing railway systems. We need to learn to operate, build and finance these systems, and this means the company has to invest in learning new things beyond our traditional area of expertise.

Our current R&D&I projects are mainly related to railway signalization. We have developed a European Railway Traffic Management System (ERTMS) and we are working on transit systems that require the development of a signalization system. As mass transit is moving towards a bigger predominance of electric vehicles, this means a more rational use of energy and a reduction in infrastructure costs. It is here and in the smart cities where we are finding a new challenge to sort out the mobility problem within cities.

How has CAF been so successful on a global level?

We have analyzed exactly who we are. The key to our success lies on the fact that we are very aware of the market and conscious of what we can and can’t do. We began by developing trams and this led to traction systems, energy accumulation, automatic systems, and everything related to comfort and information systems. We have to think bigger, because people keep asking us to design and operate their whole systems. We are present in 35 countries around the world and being smaller than our competitors gives us growth The key to of sales revenue is our success lies on potential. spent on R&D&I The UK is our the fact that we number one client are very aware of at the current time. the market.”

We won the license to renew London’s Northern Line trains of CAF’s activity is and for the Caledonian sleeper train project which outside of Spain connects London and Scotland. There are other upcoming projects that we would like to get involved in.

Our second market is the Netherlands, where we are renewing commuter trains. We are also concentrating on the US and Brazil markets.

4%

90%

Can you tell us about CAF’s high-speed platform, Oaris?

We have less experience than others in high-speed, but we have taken advantage of being behind to learn from our experience. We have 250km/h trains in Spain and

1,400

million Euros CAF’s expected revenue for 2016

Turkey and we have sold our Oaris trains for the Osloairport connection. It is a family of products with flexible options for different markets.

What are your CIVITY and URBOS products?

CIVITY is a platform for regional commuter trains. We are using it as a base line that we then adapt to different clients. The URBOS platform is for city trams and they are found all over the world.

What are the ecological advantages of modern railway?

This sector is full of environmental advantages. Every train potentially frees roads and airways from fuelbased traffic using an electric system. Trains have an edge as far as energy consumption and lower environmental impact are concerned. Furthermore, the manufacture of trains is not so energy-expensive as with other vehicles.

What is CAF’s outlook for 2016?

Our portfolio is around 5,500 million Euros, which is a record. Our expected revenue for this year is 1,400 million Euros. The forecast for 2016 is very good.

Forward-thinking Bilbao Invests in Intelligence and Innovation Juan Mari Aburto, Mayor of Bilbao What does the City Council do to encourage talent, innovation and creativity in Bilbao?

We are creating a strategic path for the development of Bilbao towards a new economy closely related to talent and knowledge. Therefore, an important element of our strategic plan is to build on Bilbao as a university town. Also, we want to grow new economic sectors geared towards the digital economy, which is based on innovation. In this respect, one of our main projects was launched in association with the University of Mondagron; it is the new center called Bilbao Berrikuntza Factory, which aims at becoming a new ecosystem for innovation and enterprise. In terms of our aspirations, we want the new talent island, Zorrozaurre, to be a space dedicated to innovation and the digital economy. The masterplan for this large urban regeneration development was conceived by the late renowned architect Zaha Hadid.

We want to grow new economic sectors geared towards the digital economy.”

How are you using private-public financing to create companies and to encourage investments in Bilbao?

How will you encourage new technologies in the Smart City Bilbao concept?

Our strategic plan also includes the Smart City project. We believe that many things have been done in Bilbao in relation to this but it should all be included within a global strategy. We want to integrate different projects related to transport, economy or culture into a more holistic vision of what the Bilbao municipality is, so it can truly become a Smart City in every way.

How are you supporting startups and entrepreneurs?

We are planning to open an entrepreneurship center very soon, which will be the nucleus for the City Council’s policy in regards to this matter. We believe that it is important to work together and to help entrepreneurs by giving them physical premises because apart from the support to their ideas, startups also need an actual space where to work. One of these buildings or centers is already functioning in the Matiko neighborhood. Rekalde will be the next one and we are looking at other areas.

Making these spaces available is important because it is a way to generate common services, synergies and contacts among entrepreneurs.

The financing and the private-public collaboration have been Bilbao’s hallmark. The partnership with the University of Mondragon for the Bilbao Berrikuntza Factory is a clear example. Bilbao reached this agreement with the university so that it would come here and offer a special degree related to entrepreneurship and innovation. At the same time, the Factory generates economic activity through the creation of startups that are installed in the same building. Bilbao is not a financing entity. However, it collaborates towards finding alliances that can generate projects. Our financing projects are related to small companies and startups, which are supported in part by the City Council.

350,000 inhabitants (source: Eustat)

€30,890 GDP per capita

2.5%

economic growth

What are Bilbao’s competitive advantages in terms of knowledge economy?

With three universities, Bilbao has a great number of students, above both the European and the Spanish average. It is a critical mass.

This in itself is already a huge competitive advantage. Furthermore, the city is very stable.

We are a reference as far as transparency and government are concerned; we are always the first city council in Spain in this respect. Thirdly, Bilbao is consistently ranked as the safest city in Spain. All these elements make Bilbao attractive.

Now we want to build on all these assets – which include also our landmark, the Guggenheim Bilbao museum – and attract people from other countries to come here and study, and have the opportunity of staying here to develop their projects.

Biscay: Much more than the Guggenheim Asier Alea, Director of Trade Promotion & Tourism of Biscay What impact on has San Sebastian being the European Capital of Culture in 2016 had on Biscay?

Most visitors to Biscay and Bilbao are attracted by its culture and gastronomy and obviously the Guggenheim museum. San Sebastian is considered as the beach of Bilbao. Therefore, the fact that San Sebastian is the cultural capital of Europe helps us to reinforce this image and indeed San Sebastian is really the cultural capital city for the entire Basque Country this year .

In parallel to this, we are hosting several small events. Furthermore, at the end of June, there will be a two-week long Smithsonian Folklife Festival in Washington DC that will portray the evolving Basque culture, identity and, obviously, economy. It is the 20th anniversary of the Guggenheim in 2017, and so we feel that this year is a great preview to the celebrations next year.

How has the Guggenheim Museum raised the profile of Bilbao and Vizcaya?

There was no tourism sector in Biscay before the Guggenheim; it is as simple that. Before 1997, the weight of the tourist sector in Biscay didn’t even reach 1% - it couldn’t even be considered to be an infant industry.

After 1997, we went from under 200,000 visitors per year - with most of those being businesspeople as we are a heavily industrial economy - to today receiving 1.3 million visitors.

We are a ‘boutique territory’ This year we expect close to 1.5 million visitors. The contribution with a boutique of the tourism sector to the GDP is premium offering.” now well above 5%.

Today, we can truly say that there is a tourism sector. The Guggenheim has become an icon for the entire Basque Country like the Eiffel Tower is to Paris or Big Ben is to London. Building it changed our frame of mind and made us believe in ourselves at a time when we needed it the most. It also meant that a territory that had never had a tourism industry is the 20th previously, was able to create a success story with the right vision. This new sector also opened a door to new anniversary of the industries which before may not have seemed tangible Guggenheim museum enough to the locals

2017

What are the aims of the “Be Basque” marketing campaign?

We do not aspire to massive tourism. We are a “boutique territory” with a boutique premium offering.

If you are interested in visiting a highly cultured place and being able to carry out many different activities in one day, then this is great place to come. Be Basque is how we want to position ourselves vis-à-vis the rest of the world.

We are looking for the 30-something young professional. We are also a very inclusive destination; one of our objectives is to increase LGBT tourism.

Our target market are people who aren’t so much looking for luxury rather than a premium offer.

5%

tourism’s contribution to the Biscay’s GDP

3%-5%

rate at which exports of industrial products are increasing

Around 80% of the tourists who come to Biscay only come to Bilbao and we want to encourage visitors to visit the whole of our territory. We are a nation of mountains, but we also have the sea. One of the brands that we are working is the Bay of Biscay and surfing is a big part of that.

Who are the Basque country’s most important trade partners?

Historically, our main market has always been the European Union, but this is losing weight to North America. Africa, South America and the Far East are also increasing their weight in our export pattern.

What do you think are the competitive advantages of Basque products and services?

Many of our international firms are medium-sized companies who have had to specialize in order to increase their competitiveness. We are very competitive on industrial products of medium and medium-high technical content which is why our exports in this particular range are increasing by three to five percent each year.

Connecting to the World Asier Atutxa, Chairman of the Port of Bilbao How did the crisis affect the Port?

The crisis between 2008 and 2012 affected us greatly, and consequently the Port’s traffic fell by 25% given that 95% of our traffic is importexport. It is a very strategic port for the closest area of influence and the local industries, but also for the furthest area of influence, because all ports try to increase their influence area.

Between 2013 and 2015 we recovered some of our lost traffic. Even counting for the fall in bulk solids due to the crisis in the iron and steel sectors coupled with high power prices, we still believe that we will close 2016 with a 3% increase.

What are the Port of Bilbao’s competitive advantages?

The Port was expanded in 1992 and a four-million square metre port was created with natural water depths which can receive oil and gas tanker and container ships of any size. Our competitive advantage is that the port is extremely diversified; 50% is made up of bulk liquid, and the rest is made up of container goods, general goods, big presses and bulk solids. We can deal with virtually any goods or products and we are connected to 900 international ports. We are extremely efficient, but we are aware that ports are mini-states that have to become increasingly more flexible in order to provide individual tailormade solutions for each client. The era of making clients comply with established commercial criteria, is definitely over.

What are the passenger traffic prospects this year?

Our ferry terminal provides services mainly to England and we receive around 80,000 annual passengers this way. Brittany Ferries calls four times a week and their cargo is mixed; RO-RO goods Without the and passengers. This year we are expecting Port of Bilbao 95,000 passengers. many Basque We are building a new industries would cruise ship terminal of traffic is not exist” and we think we will import-export close the year with a 20-21% increase in the number of cruise ships and a 27% increase in the number of passengers.

These are extremely high numbers considering that tourism in the north of Spain is very different to that number of people in of the Mediterranean, as we both have very different our area of influence niches and markets. We want to integrate the Port of Bilbao’s tourism strategy within the Basque Country’s regional tourism strategy to maximize synergies and commence homeport cruises, which would generate a bigger economic impact. Therefore our expectations for this year are to increase the number of both ferries and cruise ships.

95%

30 million 27%

What are your plans for the expansion of the Port?

Occupation levels in the port are close to 80%, while the national average is 60-65%. We expect this

increase in the number of passengers expected this year

figure to reach 85% within 12-18 months and so we need to generate more space. We have therefore invested €125 million to construct a new quay for a further 340,000 sq. m., which is the first phase of a €200 million construction project for a total area of 600,000 sq. m. We also plan to improve the railport connections with the rest of the peninsula to expand our hinterland, generate more activity in the port, more import-export tonnes and improve the economy. We also want to have a strategic position in dry ports.

How big is your area of influence?

Our area of influence includes 30 million people.

While the ports in the southern part of the peninsula are transit ports, we are a 95% imports-exports port and therefore highly strategic for the country’s industry. Indeed without the Port of Bilbao many Basque industries would not exist. Last year, even though we were the fifth port at national level, we were third in import-export number of containers.

We count for about 2% of Biscay’s GDP and 1.2% of the Basque Country’s as a whole.

The Guggenheim Bilbao’s Appeal Stronger Than Ever Juan Ignacio Vidarte, General Director of the Guggenheim Museum Bilbao The Guggenheim Bilbao is known the world over and has played a key part in the regeneration of the city over the past 20 years or so. How many visitors do you receive each year?

Ever since we opened in 1997, the number of visitors has been relatively constant at about one million a year. We received 1.1 million visitors in 2015 and we plan to reach the same number this year. About twothirds come from outside of Spain and this ratio remains stable. The main country of origin is France, which is not surprising given it is our immediate neighbor.

San Sebastián is European Capital of Culture for 2016. Does this have an impact on the museum?

It is still a bit early in the year to know precisely but it will certainly have a positive impact on the museum, if anything because it will enhance the visibility of San Sebastián and of the Basque Country in general.

Are you planning special exhibitions related to that?

Not exactly related but we do have a strong program this year, which follows a new strategic orientation whereby the Museum’s third floor is devoted to the foundations of the art of today, with a permanent installation of the most significant pieces from the Bilbao Collection accompanied by exhibitions of pre-war art. We will show an exhibition focusing on the School of The role of Paris with works from the Guggenheim the Guggenheim Collections. Also, at the end of the year, we will present the Rupf Collection from the in Bilbao’s Kunstmuseum Basel. transformation is The second floor will testament to the be dedicated to two Basque Country’s ambitious temporary innovative spirit.” exhibitions on Louise Bourgeois and Francis is when the Bacon, and the first Frank Gehry-designed floor will showcase the most contemporary artistic museum opened expressions with exhibitions devoted to Andy Warhol and Albert Oehlen, as well as video installations by Eija-Liisa Ahtila, Sam Taylor-Johnson, and Fiona Tan in the Film & Video gallery.

1997

In what ways would you say the Guggenheim has influenced the revival of this once industrial city and of the Basque Country as a whole?

When the New York-based Guggenheim Foundation decided in 1991 to expand in Europe, Bilbao was an option among others but I think the Foundation chose it because the museum was key in Bilbao’s redevelopment strategy. At the time, the notion of a museum being part of a transformation process was quite groundbreaking, and it is testament to the innovative spirit of the Basque Country and its institutions. Since then, the museum has indeed played a central role in the city’s revival but it was not an isolated project; rather, it was part of a much

1.1

million

visitors per year

The collection spans from the mid-20th century to the present day

broader plan. It has provided the city and the region with a cultural institution that has an international appeal. For example in 2014, about 27,000 news items were published about the museum in international media, reaching an estimated audience of 4 billion. This has undoubtedly an impact on the image of the region.

Another important point is that it was a project put forward from here, and this was a sign that the Basque society was ready to start moving on after years of violence. In terms of urban renewal, the museum was the first renovation project carried out in the old industrial neighborhood of Abandoibarra, which was then a marginal urban site, and it made it attractive. Economically, the Guggenheim generates 365 million euros a year in added economic activity.

Next year will be the Guggenheim Bilbao’s 20th anniversary. How do you plan to celebrate?

We want to mark the occasion and to look to the future. We are planning three types of events: firstly a very strong art program, secondly a series of special events with local cultural institutions that existed before the Guggenheim – not only art but also music, dance, theater –, and finally, we are planning a major event in the autumn of 2017 that will also be a celebration with the city of Bilbao.

Mondragon Proves That The Cooperative Business Model Works Javier Sotil, President of Mondragon Corporation The Mondragon Corporation, the world’s largest workers cooperative, has been remarkably recession-proof. How did your cooperative business model help you weather the crisis?

Indeed we are a group that incorporates some 260 cooperatives in a wide variety of sectors. We work just like any other capitalist company in the sense that we need to be competitive. But as a cooperative, we hold some values dear that other enterprises are only starting to integrate such as participating in the company’s management. Moreover, we practice internal solidarity – companies within the corporation that do well help those doing not so well –, and inter-cooperation, which besides joint ventures involves the creation of common institutions that help us all such as technological centers, a university, and mediating institutions.

The corporation’s tagline is “Humanity at Work”. What does it mean concretely?

A lot of companies nowadays have their own set of corporate values.

We were created on humanistic values, so our tagline expresses that.

Our values are to create more competitive companies with internal values of integration, involvement and participation Fast innovation is key like any corporation that wants to be to our survival competitive. But we have a fundamental principle: these values in a competitive must serve to distribute business wealth in a fairer way. The current concentration environment of wealth in just a few worldwide.” businesses and hands that we observe around the world is not cooperatives sustainable in the future. We are very proud that the wealth we generate is supported by our values that serve to distribute it better. In our company, there are no rich people and neither are there poor people. I am profoundly convinced that these values based on in total revenues fairness are key for the future.

260

11.8 bn

€

What is the strategic role of R&D in Mondragon and how much do you spend on it?

Research has historically been key for us. Our first technological center, Ikerlan, was created in 1974 and was a pioneer here. We invest 9% of

15 technology centers

our industrial sales revenue in research. Today we have 15 centers, some generic and some sectorial – machine tool, automotive industry, and lifting sector – with some transdisciplinary centers. Sixteen hundred people work in research, a number that has remained stable in spite of the crisis. We have also innovated in our organization and are particularly proud of our ecosystem. We have clustered together our university, tech centers and companies. Our aim is that they work closely together and it is an approach that, although it works better at times than other, has proven very beneficial. For example it has allowed us to break ground in the “lean production” concept whereby our industrial sector offers whole production technologies rather than mere product technologies. Our expertise in this area has made us competitive throughout the world.

How much do you depend on the Basque and Spanish economy?

Seventy-two percent of our sales are international, out of which 40% go to Europe. Outside of Europe, our main markets are China, Mexico and the U.S. This means that we do not depend heavily on the Basque and Spanish markets. The crisis affected different countries and sectors in different ways. For example in our distribution activity, Eroski has been badly hit by the crisis in Spain, but other companies that are very competitive actually benefitted from the worldwide downward spiral.

Globally, our sales have remained stable and more importantly, we have gone through the crisis without any social impact because we have used our principle of internal solidarity to move people from companies that were experiencing difficulties to others that were doing well.

High Tech Coop DanobatGroup Ready for Industry 4.0 Revolution IĂąigo Ucin, Managing Director of DanobatGroup DanobatGroup is a machine tool manufacturer that is part of the Mondragon Corporation, which is a cooperative. Did this cooperative business model help you weather the crisis?

DanobatGroup has gone through the crisis without too many problems and indeed, we did benefit from the solidarity principle of the cooperative.

For example, LagunAro helped us when our workload was low by taking on board some of our staff and we have done the same for them. It is very important for us because the machine tool sector is highly fluctuating.

Our staff is a key asset for us and the relocation and solidarity mechanisms within the corporation allowed us to overcome critical moments without much difficulty.

What are your fastest-growing sectors, and your most important foreign markets?

The fastest-growing sectors are equipment goods, automotive, aeronautics, and railway where we work on big, complex and cutting-edge projects.

About 50% of our income comes from Europe, in particular Germany, and our main non-European markets are the U.S. and China.

What percentage of your income do you invest in R&D? We dedicate about 8% of our income to R&D. We have our own tech center, IDEKO, where over a hundred highly qualified people work on basic research, including about 30 PhDs. In addition, we have people in every business unit who develop new products, and there are around 150 people dedicated to developing new applications, models and processes.

The results speak for themselves, not just in numbers, but also in the challenging projects that our staff have managed to provide solutions for.

How will you use the Innovfin funds from the European Bank of Investments (EBI)?

Very carefully! This funding, apart from being very competitive, brings us some stability. In our business, we have seen that most companies that go bankrupt Everybody do so not so is talking about industry 4.0 and the much for lack of competitiveness, Internet of Things. but because at It is a constant race.� times of low cash flow, they take risks with bad projects in bad conditions. We have been lucky and have enjoyed financial stability so that we can still choose the projects we embark on.

How important is innovation in the industrial equipment sector?

Innovation, internationalization and upsizing are key to our future. We do not compete in volumes and we are not trying to compete with low-cost countries. Rather, what we want to do is easy to define, not so easy to find, and much more difficult to achieve: to get projects

focused on high technology market niches and to cater to the demand for highly customized, highly technological products.

120

researchers and more than 30 PhDs

8%

of the turnover dedicated to R&D

35th

machine tool manufacturer in the world

What are the main innovation trends in your sector?

Everybody is talking about industry 4.0 and the Internet of Things. It is a constant race because machine tools make pieces that are used to make other machines, such as trains, planes, cars, hip and dental prosthesis, etc. There have been huge changes in pieces, in the materials utilized, in the way they are being produced and in the technologies employed. We have been mastering a large part of the new technologies such as big data, digitalization and robotics, although there are some in which we still need to improve. We took a share in a startup specialized in the treatment of big data and sensor systems for machines. We have made great developments of very complex and completely automatized lines that are now operational for some clients. For example, the Soraluce milling machine with the DAS application, which has won several prizes in Europe, has improved productivity, avoiding vibrations and spectacularly increasing the longevity of the tools.

So indeed, we devote a large share of our investment effort to 4.0.

Marrying Tradition and Innovation to Create Great Wines Juan Luis Cañas, owner of Bodegas Luis Cañas Created at the end of the 1920s by your grandparents, Bodegas Luis Cañas is one of the best wineries in Spain. How would you define its personality?

I would say that our standout characteristic among Spanish wineries is that we are reliable. By this I mean that the quality of our wines is always reliable. Obviously the fact that we are in the Rioja, the most prestigious certificate of origin in Spain, is also an important part of our identity. And we are unbeatable on price and quality.

Is being Basque an important part of your business and your wines?

Without a doubt. We are from the Rioja Alavesa in the Basque Country. I cannot say we are better here than the wineries in the proper Rioja Valley, but we are different. The climate is different, in fact. We are on the other side of the Ebro River, up against the Cantabrian mountain range where we have both an Atlantic and a Mediterranean climate. Our soil is unique, too. But that aside, I think we are different because of the people who work here. I’m not saying we are better or worse, but we are different. For example, we have certain criteria, we are serious and hardworking, and we have word of mouth on our side.

You also have a reputation for being innovative, ever since 1970 when your parents first had the idea of bottling young wine rather than selling it in bulk...

Ironically, one of our major innovations has been to look back at the past and take a traditional approach to viticulture, for example by banning the use of pesticides in order to regain One of our the authenticity of the fruit itself. major innovations has been to take a Looking back at how our parents used to work, traditional approach we decided some to viticulture.” years ago, to only pick grapes from Spanish bodega vines that had just one, two or three bunches of less in 2015* than 250 grams. We also made some innovative steps * In the ranking of Spanish in grape harvesting technology, setting up sorting tables magazine “Vivir el Vino” once the grapes are boxed up. They first separate the bad bunches and then the bad fruits. In the new winery we are setting up in Samaniego, called Amaren after my mother, all the wines will pass through a double sorting table and everything will be done in cement is the year when tanks instead of stainless steel in order to ensure quality the winery was and authenticity.

Best

1928 founded

Apart from making and selling wine, you also offer tasting tours. Is oenological tourism an important part of the business?

It is extremely important. We have a good base of visitors, mostly French and German, and now increasingly Americans and Canadians, who love to eat and drink well. When they come here, we receive them very well, and we offer them an array of typical dishes

2,000 tons

of grape processed every year

from this region, each paired with a different wine. The range of wines we serve are from Bodega Luis Cañas, named after my father, from Bodegas Amaren, and from our winery in the Ribera del Duero. These gourmet customers enjoy this experience and we treat them as ambassadors of our bodegas.

Would you say your winery contributes to the push for innovation in the Basque Country?

Yes, definitely. We work with the University of Navarra and with several innovation and technology centers in the Basque country. One of the most important things for us is that our directors, oenologists, and engineers get a good education and stay up to date. We collaborate in particular with the wine school of La Rioja and the School of Oenology of Navarra.

Bodegas Cañas export to 40 countries. What are your priority foreign markets?

Europe is our main market, notably Germany, the UK, and Switzerland. About 30% of our market is outside Europe, mainly in North and South America, and we are also getting a lot of attention in Asia.

Spearheading the Rise of the Spanish Art of Winemaking Alejandro Aznar, Chairman of Marqués de Riscal The Marqués de Riscal brand is among the most renowned in Spain, not only for its wines but also for the City of Wine built in 2006 by Frank Gehry, the architect of the Guggenheim Bilbao museum. This groundbreaking initiative was part of a rebranding that you masterminded. Why was it necessary?

It was necessary because we are now in a global world, and we need strong, global brands. Marqués de Riscal had a strong brand at a national level, and has always been a strong exporter. But we realized that promoting our products in a conventional way had become limited, especially because as a midInnovation size company, we cannot afford to is good but in the world of wine, it can advertize throughout the world. So we chose unconventional advertizing also mean using 19th through architecture and Frank century techniques.” Gehry because of the success of the Guggenheim Museum in Bilbao, which relaunched the city. As a Basque company, it made a lot of sense to emulate this success.

How important are Marqués de Riscal’s tourism-related activities (wine tasting, wine therapy, tourism) compared to wine producing?

When we started wine tasting and oenotourism in the 90s, these activities were residual. We had about 3,000 visitors a year. When we launched our strategic development plan Project 2000, one of the objectives was to introduce oenotourism as was already done at the time in the U.S., in particular the Napa Valley. We will never equal the number of visitors they have over there because of our size but nevertheless, we are now close to 100,000 a year. So it has definitely become a key activity for us; it represents about 20% of our turnover. At the Frank Gehry Marqués de Riscal Hotel, about 80% of guests are foreigners and when they come, they also visit the Basque Country. So it has become an important asset for the region.

Winemaking is a traditional craft. How do you combine the traditional with the need to innovate?

We do our own research and development and we also collaborate with research institutions here in the area of agriculture. This said, innovation

is good of course but in the world of wine, you have to be careful. And actually, some of our innovations consist in going back to our roots and revisiting 19th century techniques. For example, our wine Baron de Chirel is made with traditional methods, all hand-made, with organic agriculture and no fertilizers. Obviously, you cannot produce huge volumes with such methods but the quality, the taste are unique and distinctive.

Do you think Spanish wines have the reputation they deserve in international markets?

I don’t think so, not yet. Spanish wines deliver a great quality-price ratio but we have to increase awareness worldwide and do more campaigning.

Now, we have a great asset in the fact that Spanish gastronomy has become renowned the world over in the past 20 years or so and indeed, the Basque Country is clearly at the forefront in this respect. The Basque Academy of Gastronomy has made great efforts to promote our regional cuisine and with great success. We should do the same with our wines and go hand in hand with the many talented chefs and restaurants we have, and also promote our wines internationally as do the Spanish and Basque gastronomy.

How much of your production do you export and what are your priority markets?

The Marqués de Riscal City of Wine in Elciego.

It depends on the year but overall, we export about two thirds of our production in about 100 countries. The U.S. is our main export market in volume but there are other key countries such as Germany, Mexico, Switzerland and Japan. We are also noting very good results in Latin America, in particular Colombia and Peru. Asia is becoming increasingly important. We have been present in Japan for many years, and we are now growing our sales in China, the Philippines and Vietnam.

Innobasque: Creating a Better Future through Innovation José Maria Villate, Managing Director of Innobasque How much is invested in innovation in the Basque Country and what are the most advanced sectors?

The Basque Country invests approximately 2% of its GDP in R&D and 4% in innovation. This is close to the European average. The administration is responsible for about a third of this investment and the rest is funded by the private sector. The most innovative sectors are of course the ICTs, the energy sector, the iron and steel industry, the automotive sector and the telecommunications sector. The Science, Technology and Innovation Plan Euskadi 2020 chose three main strategic sectors which are energy, advanced manufacturing and health applied biosciences.

Is there a unique approach in Basque innovation?

The Basque Country has 2.1 million inhabitants and 160,000 companies. Only 10,000 of these companies have more than ten employees, so the approach can vary a great deal.

One of our goals is give exposure to small-scale entrepreneurs who have big ideas, because they are unknown and they themselves do not know the system. Therefore, One of our goals is to boost the one of our goals is to boost the innovation ecosystem innovation ecosystem and generate relationships between our members. and generate What distinguishes the Basque Innovation is extremely important for everyone. According to the relationships between Country is our ability to network Basque Innovation Index survey, Indizea, it is not just about R&D, and that we all have an innate sense which accounts for 33% of the increase in productivity, but also inour members” of innovation to grow our nation. novation in a wider sense in terms of management, organizations, cliWhen we opened our doors in 2007, we wondered how the public and ent relationships and so on. Innobasque was founded in 2007. Our private sector could transform the Basque Country members include all the clusters, universities, comusing innovation as the driver. The Basque Country panies, SMEs, members of society, etc. We have the wants to become a European reference in innovation strength of a thousand members and a community by 2030 and this has made Innobasque the whole of 40,000 more through social networks. country’s project in spite of our sectoral, political or year that Innobasque What activities does Innobasque carry out? geographical differences. was founded Innobasque plays a relevant role in the design, What is the Basque Country’s competitive deployment and evaluation of innovation policies. edge in innovation?

We also organize countless activities to promote The Basque Council of Innovation, Science and a culture of innovation and boost collaborative Technology is very wide-reaching and helps us innovation in our region. Furthermore, we also try interact with each other. There is also an active to ensure that social innovation is behind every step members of entrepreneurial network. After the crisis in the that is taken in this field. In June, we will be holding Innobasque 1980s we put the emphasis on clusters, industry and the fifth edition of Global Innovation Day and every R&D. In 2005, we realized that innovation could be month we gather hundreds of people around an an engine to transform the country. John Kao, the innovative topic to show the best Basque practices innovation guru, says that other than innovation to in innovation. Overall, 20,000 people are involved develop new products and services, there is another in the activities of Innobasque each year. innovation model that applies to cities and nations.

Since 2008 we have taken part in international number of people This is their ability to continuously create their events and organizations such the I-20, which is a involved in the best desired future, and this is the motto we have group started by John Kao to gather the 20 most activities of Innobasque innovative nations, and the SIX (Social Innovation adopted. We all have to cooperate as we are a small country with close-knit connections.

Exchange). each year

2007

1,000

20,000

A City That Builds its Economic Future on Sustainability Gorka Urtaran, Mayor of Vitoria-Gasteiz You took office in the wake of the May 2015 municipal elections.

What were your first priorities?

I had three main challenges. The first one was to guarantee the well-being of the citizens who have suffered from several years of economic crisis.

We refocused the overall policy of the city to help everyone improve their lives as much as possible. The second challenge was to overcome this economic crisis and return to a path of growth and job creation, but creating jobs that are stable and respectable. We focus our efforts on the industrial sector, which has always been a strong point of VitoriaGasteiz. Indeed, before the crisis, industry contributed 27% of the local GDP and 25% of the jobs. The third challenge is the modernization of the city, both from a social point of view and in terms of equipment and infrastructure. We want to become a 21st century city that is plural, open and tolerant, and we want to encourage healthy and sustainable mobility through the expansion of the tramway, the bus and public transport system, the improvement of the older neighborhoods, and the regeneration of public spaces.

Vitoria-Gasteiz was named as European Green Capital in 2012. How important is this award to your administration and how do you plan to build on this legacy?

Indeed, this prize was given to the city thanks to the work carried out by many previous governments and mayors, but also, and especially, thanks to the work of the citizens themselves. Also thanks to the work of our predecessors, we We want attended the United Nations Climate Change Conference in Paris in December 2015, and to become a 21st century city we signed in April the Basque Declaration adopted at the conclusion of the eighth that is modern, European Conference sustainable, on Sustainable Cities and Towns, which is the open and flagship event in Europe tolerant.” in 2016 for discussion and knowledge exchange inhabitants on urban local sustainability and which was held this year in the Basque country. The award is not the ultimate objective but rather, we have to use it to keep improving every aspect related to sustainability. One important objective is that we want to become a city that is neutral in carbon dioxide emissions and since per capita of Spain transportation is one of the sectors that generate most (135% of the average EU) CO2 emissions, sustainable mobility is a key priority for us. For example we will expand the tramway, which is already a huge success, and we plan to implement a Rapid Bus Transit system to offer high quality service to all the residents of the surrounding neighborhoods.

246,000

1st GDP

In what areas apart from environment and sustainability do you consider that VitoriaGasteiz is particularly innovative?

Vitoria-Gasteiz benefits from the presence in the Basque

2.08%

of the GDP invested in R&D

(higher than EU average)

Country of the Miñano Technological Park, where the Center for Enterprises and Innovation of Alava (Centro de Empresas e Innovación de Álava, CEIA) is based, as well as the Basque government-funded Center for Cooperative Research in Biosciences (CIC Biogune), based near Bilbao. The City Council works with CIC Biogune in projects such as the improvement of the heating system of municipal pools, of public lighting, etc. But then we also innovate in less high tech areas.

One shining example is the renovation of our 14th century Santa María Cathedral, which drew a lot of attention.

What would you like to have achieved at the end of your term, in three years time?

When we reach 2019, if we can look back and see that the public policies we implemented have really made Vitoria-Gasteiz a better city, with a higher quality of life, more jobs, more economic activity and a higher respect for the environment, I would be more than proud.

Green Vitoria-Gasteiz Wants to Promote Sustainable Tourism Nerea Melgosa, Councilor for Tourism, Employment & Economic Development at the Vitoria-Gasteiz City Council How important is tourism for the economy of the city of Vitoria-Gasteiz?

Tourism is an important sector for our economy, and it is thriving. It has grown by 15% in the last five years and, more interestingly, the amount of overnight stays has increased: people used to stay one night only and now they stay longer, which is encouraging. We actively promote tourism but one key aspect is that we focus on developing sustainable tourism. Vitoria-Gasteiz was named European Green Capital in 2012, a prestigious award that I believe was well deserved. We also obtained the Biosphere certification, the first We believe that tourism must be municipality in Spain to do so, controlled, selective which makes Vitoria-Gasteiz very attractive to anyone concerned about and of high quality, sustainable tourism. Indeed, we as opposed to mass have an entire infrastructure based upon sustainable tourism, not only tourism.� environmentally-speaking because of our parks and the green belt that surrounds the city, but also in terms of policy. We believe that tourism must be controlled, selective and of high quality and we want to avoid what happened to other Spanish cities where mass tourism is affecting the life of local residents.

What type of tourism are you seeking to promote, for which categories of clientele?

Our strategy is based on three pillars: sustainable tourism, sports and family tourism.

As regards sustainable tourism, another aspect I would like to highlight is our recently inaugurated Europa Congress Hall, in the city center, which is innovative in several ways, notably the environmentally friendly way in which it was built. There are many other aspects in our tourism infrastructure that contribute to sustainable tourism, but the one I would like to mention in particular is our public transportation system, which enables visitors to move around town easily.

Regarding sports, every year Vitoria-Gasteiz hosts a world-class triathlon event, which has positioned us as a renowned sports tourism city. People come from as far away as Hawaii weeks before the triathlon in order to acclimatize. It is a very popular event here, and it contributes to our feeling of belonging. Hundreds of residents volunteer each year

to participate in its organization and the streets are lined with people cheering the athletes.

Concerning family tourism, we believe Vitoria-Gasteiz is well adapted to this type of visitor because it is very comfortable and safe. Here, children can play in parks while their parents have coffee without any risk. There are also scores of events organized in the city and by the various neighborhoods that are appealing to families, and our civic centers also offer a wide array of activities, many of them for free. Also, people can enjoy all kinds of sports in the green belt surrounding Vitoria-Gasteiz, notably cycling along the many bicycle paths. Actually, a third of local journeys are made by pushbike.

Would you say Vitoria-Gasteiz is innovative in the way it promotes tourism in the city?

Yes I believe we are. We are innovative because the city and many of the products that people can buy here are environmentally sustainable. Our certification means a lot to us: it is difficult to obtain and you have to meet exacting criteria, and this is something we are keen to promote. As I mentioned before, our new Europa Congress Hall is a new, innovative infrastructure for congress tourism. But more broadly, we are innovative because we are making use of the local and social fabric of the city. There are many cultural events here that are deeply rooted in our traditions, for example the Kaldearte, which means “art in the street�. We have a great quality of life here and this is what we want to share with visitors.

Riding High on the Growth of the Basque Economy Gregorio Villalabeitia, President of Kutxabank How is the demand for financing growing in the Basque business sector?

Are you seeing an increase in demand for loans, in particular from SMEs? In the second semester of 2014 and in 2015, solvent demand has increased. There is clearly a growth trend in retail, mortgages and personal consumption, but also in the business sector, both for short term commercial investment and for financing fixed company assets. We are having a twodigit growth at the moment, linked to the fact that 2015 has been a very good year for the Spanish economy, both in comparative and in absolute results. With a 3% growth in the Basque Country, the third most industrial region of Spain after Madrid and Barcelona, the demand for business lending has increased.

Our growth is around 30I don’t think there is any 40% but the lending/investment balance business project is not growing yet because amortizations for intense lending activity in the past are in the Basque higher than the new lending concessions.

Country that This balance however, may grow in 2016 and 2017, even though 2016 is not as fails for lack of good as 2015. There is liquidity today; financing.” there is solvent demand and good prices.

I don’t think there are any business projects in the Basque country that fail because of lack of financing.

Following the 2008 crisis, the Spanish banking sector went through an intense period of restructuring. How did it affect Kutxabank?

The banking crisis has had an enormous impact on the whole financial system, which translated into the reduction of over 30% in the number of branches and staff. The restructuring of Spanish banks has been one of the biggest in Europe: the number of savings banks shrunk from 45 to just two. But Kutxabank has been one of the least affected. There are about 137 financial entities in Spain, very few in comparison to Germany or Italy. In the case of Kutxabank, which is the result of the loose merger of three regional savings banks, this restructuring did not affect us. We carried out the merger of those three savings banks, but it was not compulsory; it was healthy.

Unlike many entities that needed restructuring to access funds, we did not need any help.

However, the financial business environment

with negative interest rates compels banks to find new ways to reduce their structure, and I think that the restructuring process is not quite over yet. For Kutxabank, this means we are reducing staff and branch numbers in locations where there is no business.

How does Kutxabank support investments in R&D in the Basque Country?

We have signed a series of agreements with the Basque institutions to support and finance business investments in R&D. For example, we have an agreement called Makina Berria (New Machine) to finance SMEs looking to invest in the purchase of new equipment. These are financial agreements in which companies and banks take part, profit in first and they are also stimulated by public entities.

€75.2m semester of 2016

16.5%

increase compared with first semester of 2015

38%

increase in financing for businesses first semester of 2016

How does Kutxabank innovate in its processes and services to customers?

Digitalization is key for banking innovation: customers demand more friendliness and competition which puts pressure on us. We have a comparatively high digitalization level: 64% of our customers have subscribed to online banking contracts, and 30% bank only online. Mobile payment is the most advanced area. A unified platform for immediate payments via mobile is about to be launched in Spain that will enable customers to transfer money to whoever they want, whether or not the recipient is a client of Kutxabank’s. This ties to the use of the mobile to pay in shops: we have an add-on reader for mobiles that allows you to pay just by passing the phone over the point of sale terminal.

One of Spain’s Healthiest and Most Sustainable Banks Xabier Sagredo Ormaza, President of BBK Bilbao Bizkaia Kutxa (BBK) was created 108 years ago as a savings bank and it is now one of Spain’s leading banks. What is the role of BBK in the Basque economy and society?

It is impossible to understand the Basque economy without considering BBK. We were founded to provide loans and banking services to people who could not access the traditional banking system. BBK also invested in the creation of important companies such as energy provider Iberdrola and the oil and gas company Petronor, among others. The dividends obtained went back to the shareholders in the form of social works.

Spain’s banking sector has gone through a period of tremendous restructuring in the wake of the 2008 crisis. What was the impact for BBK? Indeed, there has been a profound restructuring process in Spain, which was mainly due to poor management in banks. The number of banks has shrunk from 55 to 14. However, our case is special because we have always been very well managed and we were never in need of financial rescue. Furthermore, we have always been one of the most solvent establishments in Spain. We are the second largest banking institution in Spain. We created Kutxabank in 2012, which is 100% owned by us, in order to retain our legal personality as a savings bank. With the new law introduced in 2013, we had to transform into a banking entity. We will now have a banking foundation that will carry out social work, as well as majority shares in Kutxabank and diversification investment plans.

How does BBK support investment in R&D in the Basque Country?

We fully support R&D, as we believe that it prepares us for the future.

In today’s globalized world, technology is fundamental to make a difference. If you are prepared, it doesn’t matter whether you are in Bilbao or in Kentucky. We notably have two programs aimed at fostering We are ready; innovation, and in net income 2015 we have no debt and particular young talent: “Change the have more than World”, which we €3.5 million to also call BBK 5.0, finance new and BBK Talent.

We are particularly investments.” concerned about youth employment, which is a pressing issue here in Spain. Through “Change the World”, we are looking employees for people who want to create new businesses and we will support them financially and in terms of equity, as partners. We are mainly interested in three areas: artificial intelligence, biotechnology, and fashion.

€218.8m

6,400

Do you have plans for international expansion?

We believe in globalization because this is the world we live in, and we do not think that being a small country is an impediment but rather, an opportunity.

Our market today is bigger, in particular because

1,013 branches

Basque people have created companies overseas.

There is a strong work ethic here and people are quite competitive.

What is the role of Sala BBK and the Mediateca?

Sala BBK is the emblem of our sociocultural activities.

The idea is to showcase and offer a series of cultural activities that are generally not programmed by commercial entities because of their cost, without competing with major cultural institutions such as the Opera. As for the Mediateca, it is part of an important project called Escuela Centro de Bilbao, which targets an underprivileged area of the city. Through the Mediateca, residents can borrow a book, work, watch foreign television channels, and access national and international press, among other things. It is free and open almost every day.

What is the biggest challenge this year?

In April, we concluded the end of the restructuring phase. We are ready. We have no debt and have more than 3.5 million euros in funds to finance new investments, BBK 5.0 and other social works, so we can keep growing sustainably.

Giant Basque Automotive Company Takes on the World Antonio Pradera Jaúregui, Chairman of CIE Automotive CIE Automotive is one of the biggest companies in the Basque Country and a true success story. Would you say it is a Basque company or a multinational one?

We like to define ourselves as a “multi-local” company. In the automotive sector, it is very important to live each market with its specific characteristics.

For example the needs in India are very different from those of the United States. This said, we are Basque people in our philosophy and our culture.

We descend from families that created this business fifty years ago, and then we took the baton, finishing the process of making CIE Automotive into a multinational company.

In 2015, you broke all of your turnover records with a net result of €129 million, a 59% increase compared to 2014. How did you achieve such an exceptional result?

2015 was the consolidation year, during which everything we had carried out in terms of corporate operations and a series of greenfields around the world began to yield results. But this is only the first step to something much more important. We have announced that in the next five years, we will again double our net result, notably through the improvement of our processes, in particular in India and Germany. Another aspect that we are improving is everything that relates to the digital world and the smart workplace. We believe we have very good years ahead of us.

In the next five years we will again double our net result through the improvement of our processes.”

How do you benefit from the presence in the Basque Country of a strong automobile cluster?

Not only do we have the cluster but we The group is present throughout the world. What is the also have the Automotive Intelligence proportion of Europe vs. the rest of the world?

Center (AIC), which shows how public- More than half, 55%, of our turnover is made in Europe, 25% in the NAFTA* area and 20% in emerging markets, including private partnerships 13% in Asia and 7% in Brazil. We want to grow the can be done in an proportion of our business in emerging markets, in excellent way. There particular India where we acquired a component firm, are few countries in the Mahindra Auto Parts. All the forecasts predict doubleworld that have such digit growth in India for the next 20 years, and we a cooperative movement as the Basque Country, for net result believe it has a great future. Regarding the rest of Asia, example with the leading cooperative Mondragon, and in 2015 we are focusing on Thailand and Indonesia rather than it benefits the whole society. on China, even though we have four factories there What are the main trends that will impact your catering to a niche sector.

business in the short and medium term?

Probably the strongest trend we will see in the next five years will be hybrid cars; I mean those you can actually connect to the electricity grid to get energy.

What does it entail for us? With two engines – electrical and combustion –, cars will need a larger space and a smaller engine. So we will probably see a downsizing of all the engines, which means we will have to work with higher pressure. This in turn will lead us to shift from casting to forge and everything else that relates to a better use of the space and the production of smaller engines.

€129m

22,812 employees (2015)

45% of the turnover outside of Europe

Why is the Basque Country’s economy doing so well compared to other Spanish regions?

The main reason is that we have a strong industry. In the automotive sector, which is key both for the Basque Country and Spain, we have enjoyed a high degree of social dialogue and peace that has enabled companies to adopt a flexible model, which is fundamental to respond to the ups and downs of our market where some months, you have to work six days a week and some others, maybe only four. Also, our sector is constantly innovating. * North American Free Trade Agreement between the U.S., Canada and Mexico

Innovation through Internationalization Aner Garmendia, CEO of EGA Master EGA Master was founded in 1990 in Vitoria-Gasteiz. It is a family company making high quality industrial tools and has clients in more than 150 countries with a business volume of about 20 million Euros. Why was the company founded?

We identified a gap in the market and so we wanted to facilitate integral tool solutions for the most demanding industrial companies through innovation in safety and efficiency.

We offer flexible, integral solutions, which can be personalized to our clients’ specific needs. This is what makes us different.

EGA Master’s baseline is “Art in innovation”. How are you innovating in both your products and management?

People think that innovation comes from scientists in a white lab coat.

Real innovation comes from the interaction between companies and the market or the end user. By listening to their problems and needs, we can develop new products or improve existing ones to respond to these issues. The best way to do this is by having a strong international expansion policy. Most companies are founded at a regional or local level and at a later stage they start to look at international markets. EGA Master started the other way around. My father decided to forget about the national market and to focus exclusively on international markets, even though he knew it would be more difficult.

Companies learn a great deal and have to adapt themselves when they are in a hostile environment such as an international Global market. Learning mechanisms are presence and activated and they become competitive in direct contact a sustainable manner. Another advantage with the market that comes from internationalization is allows for more that by being present in many different innovation.” countries you gain information about the market in terms of new technologies, tendencies and demands and this allows you to be a step ahead in your year EGA Master processes. The third advantage of internationalization is was founded that it provides a diversification of risk as it is unlikely that all markets collapse simultaneously. There is a clear link between internationalization and innovation as these two strategies strengthen each other. Global presence and direct contact with the market allows for more innovation, and the more innovative you are, the number of countries easier it is to develop at an international level. This is how we have managed to innovate in small market where EGA Master niches but which have great value.

1990 150 has clients

EGA Master dedicates about 6-7% of its revenues to research and development and you have about 200 patents. What are your priority innovation areas?

Our priority areas are safety, both for companies and for people. If we can reduce risk, companies are prepared to pay more to ensure a safe work

6-7% of revenues spent on R&D

environment. We have therefore been developing non-sparking and explosion-proof tools. We have also developed tools for high-altitude works so that if they fall they do not hit anybody or break any machinery.

We have also developed safe tools for working with high voltage. Our clients mainly work in mining, petrol, oil and gas, and electrical generation; industries which are high-risk and where even a small accident can be catastrophic.

EGA Master grew by 18% in 2015 which was impressive. What are your objectives for 2016?

Our objectives for this year are even more ambitious as we want to grow by 25%. We aim to do this in areas which have been negatively affected by the fall in oil prices such as Africa, the Middle East and Latin America. Oil, mining and gas companies have to be even more efficient and productive during difficult times. We are a new company in comparison to some of our competitors and we believe that our message about safety, efficiency and productivity will be well received as we can help them improve their product.

Basque Company Aims to Become Market Leader in Graphene Jesus de la Fuente, CEO of Graphenea Founded in 2010 in San Sebastian, Graphenea is one of Europe’s main producers of graphene, exporting to 40 countries.

Graphenea is part of a growing cluster of nanotechnology companies based at the Basque nanotechnology research center CIC nanoGune. How important was it to be based there when you started up?

It was critical: it is one of the state’s nanotechnology and research centers, comparable to other centers such as MIT in Boston. We would not have been able to start up without the support of CIC nanoGune, which gave us access not only to the necessary equipment but also to people, knowledge and other companies with which we were able to network. When you are starting a company, it is very important and it has a huge impact on your progress and development speed.

How do you fund your growth and to what extent do Basque authorities and institutions help you?

We have had very good relations with banks and institutions right from the start. For example, we benefitted from the Business Innovation Being based Center (BIC) network in the Basque Country, in particular BIC Berrilan. in the Basque The Basque Country is small so it is nanoscience easy to develop close relationships: research center you have easy access to decisionwas decisive when makers both in the private and public Graphenea sectors. The Basque authorities helped us too at the start, with a grant from batteries, we are working on advanced cathodes, post-lithium ion started up.” the Department of Industry. After the batteries and other types of electrochemical batteries that are of first round of funding, mainly from private investors and business much better quality than the current, lithium ones. In the polymer industry, we are in close relationship with several angels, we obtained investment from Repsol Energy producers, in particular in electrochemicals, to Ventures. And last year, we were awarded a grant introduce graphene materials in their polymers. As from the European Union’s Horizon 2020 program far as mobile telephony is concerned, the next big for SMEs. We used some of these funds to finance challenge is flexible electronics. Soon, our mobile our participation in the Graphene Flagship Project, is when graphene phones and tablets will be as flexible as a sheet of which is supported by the EU. It was an important was isolated at paper. Graphene is part of the solution to achieve milestone because this project gathered some of that, in particular regarding touch screens and Europe’s main industrial companies such as Nokia, the University of batteries.

BASF, Bosch, and STMicroelectronics, to name a Manchester few. As the demand for graphene grows, this gives What are your plans for international us very good opportunities to work with all these expansion? companies.

We have opened an office in Cambridge, What segments are you focusing on?

Massachusetts in order to be near those customers At the moment, we are focused on three industry who are deciding on the technology for the next times smaller segments: semiconductors, batteries and advanced generation of devices. Also, we have a close than a human hair polymers. As regards semiconductors, we are relationship with the Massachusetts Institute of focusing on how to comply with the stringent Technology (MIT). In addition, we have a strong regulations and standards governing production presence in Japan, where a lot is happening fabs and foundries. At the moment, manufacturing regarding graphene. According to industry analysts, is mainly done in laboratories. But the next stage our market share is at present around 10%. We want stronger than steel of to achieve at least a 25-30% share and be leaders in will be to integrate the production of graphene semiconductors in industrial facilities. As regards the market. the same thickness

2004

1 million

200 times

Boutique Forge Irizar Shows Resilience in Competitive Markets Maria Irizar, Managing Director of Irizar Forge Irizar Forge is one of the Basque Country’s most renowned industrial companies, created 93 years ago by your family. You are the fourth generation at the helm. What challenges are you faced with today, compared with your parents?

I took the role of Managing Director after a successful succession process.

My parents and I had been working closely together for some 12 years before deciding to basically swap our roles: I took executive leadership, managing the day-to-day operations, and they kept a more long-term, strategic role on the board of directors. Obviously, over the course of almost a century, the market has profoundly changed. My grandfather’s market was local; my parents’ market was European, and I deal with global, international markets. These are turbulent markets in which oil prices in particular affect everybody and everything.

Indeed, Irizar’s sector, metallurgy, is particularly hit by competition from Asia. How do you manage to stay afloat?

Competition from China and other Asian low-cost countries is not recent; it has been going on for 25 years. We are not suffering from it but rather living with it as best we can. I consider these countries as our partners. We are not fighting; on the contrary, we have identified similar companies, competitors, who are doing more or less the same as us, and we negotiated deals: I buy from you, you buy from me; I distribute your products, you distribute mine. It works; it is a way of protecting our business and to survive.

Your sector is quite traditional. How do you innovate?

Our core business is very traditional technology: forging is centuries old but automation and complementary technologies make the difference.

In our case, the most significant recent innovation has been in our business model. From being specialized in catering for the onshore industry, we made the jump to the offshore industry, targeting more niche markets.

Our most important innovation Our main product of late has been to for that market is year Irizar the hook. When move in the we started in the was founded offshore industry.” offshore industry, we saw that many components – lifting components for heavy-duty works, mooring lines, pieces on which other pieces are hooked – were cast rather than forged. Casting is quite simple: you put liquid steel in a mold, a bit like a muffin. Our technology is different, more costly but annual turnover it provides longer lifetime, greater lifting capacity, few maintenance costs. This is particularly interesting for the marine industry and offshore platforms since they work in difficult, very demanding weather conditions.

1923 €12m

What are Irizar Forge’s unique advantages compared to its main competitors?

I think the main differentiator resides in who we are:

50

employees

we are 100 years young and headed by a woman.

Clients and prospects who visit us are often surprised by how young our staff is, and I believe this gives us an edge. In the onshore industry, our main competitors are traditional crane and hook manufacturers, most of whom are in Italy and Germany. In heavy equipment, there are really only two main actors: Irizar and a German company.

Are you looking for investors?

We made a significant investment of €15 million two years ago when we decided to go into the offshore market. Before that, we had a turnover of €1012 million with an EBITDA of 15%. Our goal is to increase sales by at least 50% but we have not reached this objective yet even though our EBITDA remains at the same level. We are indeed looking for a partner, but rather than a financial one, an industrial one.

Given our track record, and even though the market is difficult right now because of the oil price slump that affects the offshore industry, the potential of Irizar remains huge.

Basque Aeronautics Sector Leader Invests in Clean Skies Ignacio Mataix, CEO of ITP Created in 1989, in just 25 years, ITP has achieved a leading position in the global aeronautics sector. Headquartered in Bilbao, it is also a major player in the Basque space and aeronautics cluster Hegan. What are the strategic advantages for ITP to be based in the Basque Country?

Hegan is a cluster that was created by three companies: ITP, Aernnova and Sener, the three of them being at the top of the engineering industry.

Its objectives are to foster collaboration among companies operating in the aerospace sector in the Basque Country, and to promote the sector as a whole. It works quite well not only for the companies that are part of it but also for the Basque Country. For ITP, there are many advantages in being based here. The Basque Country has a long industrial tradition and is very “industry-minded”. Industries have a very supportive environment here, not only among public authorities but also the people themselves. Furthermore, there is a lot of dedication and interest from the Basque universities and from entities that provide funding. It is a combination of good support, good talented people and a good working environment.

What is the economic impact of the space and aeronautics industry on the Basque Country?

Hegan contributes a little under 2% to the GDP of the Basque Country.

Now, from an R&D point of view, it is one of the sectors where investments are the highest. ITP invests consistently above 10% of its sales revenue in R&D. Indeed, we have also consistently been among the three top companies both in the Basque Country and in Spain in terms of R&D over sales.

What are the main sectors in which you invest in R&D? We have four core products: low-pressure turbines, radial structures, Can you tell us a bit more about your involvement in Clean Sky 2?

It is a €4 billion project sponsored by the European externals of the engines, and compressors. A substanUnion to develop breakthrough technologies tial part of our into significantly increase the environmental vestment goes into performance of airplanes. We will invest €40 the technology to million over the next five years mostly to make our A combination develop our prodturbines more environmentally-friendly, lighter and ucts, in particular in turnover (2015) of good support, more efficient in order to reduce CO2 and NOX low-pressure and good talented people emissions and meet the European requirements for high-speed turand a good working bines. In addition, 2020 and 2050. environment.” and this is very You are operating in a sector where there important for us, are huge companies such as Boeing, we invest in indusAirbus, Rolls Royce, which is one of your trial technologies to increase the efficiency of our facemployees partners, and many others. What would you tories, to improve manufacturing with new, stronger, say defines ITP? more environment-friendly materials. We have created Although we provide about 20% of an engine, we a special unit, the Center for Advanced Aeronautical are still a small company competing with very large Manufacturing (Centro de Fabricación Aeronáutica companies that have many more years of experience Avanzada, CFAA) precisely to explore new technolothan us. But in just 25 years we have succeeded in gies, which has been sponsored by the Basque govtaking a significant role in the aeronautics sector. ernment. Another very important area for investment investment in Today, the sector believes in us: we deliver our is the European Clean Sky 2 project, which will reR&D over sales products to all the leading companies in the world. ceive 50% of our investment in R&D over the next I think it is a great achievement. five years.

€710m

3,054 10%

The Lab Where Technology is Transformed Into GDP Iñaki San Sebastián, CEO of Tecnalia Tecnalia is quite a young applied research institution, created in 2011. What is its purpose and what are your priority objectives?

Tecnalia is the result of the merging of eight research centers, most of them in the private sector. In the early 2000s, seeking to improve their output and the quality of their research, they started to cooperate ever more deeply and finally, in 2009, they decided to merge.

Thus Tecnalia Research and Innovation was created. We are quite a young organization although some of the original research centers that merged had been around for more than 50 years. We are now one of the largest Research and Technology Organization (RTO) companies in Europe. Our strategic plan for 2015-2020 is focused on three main areas. Firstly, to increase our impact on the local market and industry and transform technology into GDP. The second objective is technological excellence.

We are aligned with the smartest specialization, which means we have What are the main technological areas on which you are to focus on the fields where we can really add value for our customers focused? and industry, and at the same time be relevant and international. The Three of our divisions are 100% aligned with the Basque Country third point is to engage our staff. We have about 1,400 researchers. It Intelligent Specialization Strategy (RIS3) and are industry and transport, is important to emphasize we are a non- energy, notably of course renewables, and health. We have a division working on sustainable construction, which is profit organization, quite an active sector as there are important needs Tecnalia will which means that for innovative solutions both for rehabilitating our core mission is have an impact buildings and for new, more efficient and smart to improve quality of about €1 billion buildings. Our ICT division is involved in big of life in society. In in the Basque data and smart products. And the sixth division terms of figures, annual turnover economy between our objective is to provides advanced technological services. The largest sector for us is industry and transport, which now and 2020.” increase our activity includes aeronautics: we work on manufacturing, by 30% between now machining, robotics, and automation. and 2020.

€103m

How does Tecnalia contribute to increasing the competitiveness of the Basque industry?

We have advanced technological services and can help companies in many fields to obtain certification in order to sell their products.

Typically, we can provide this service to almost 3,000 companies in a two-year period. In addition, we provide guidance to companies that are in the process of reorganization, whether it is opening a new business line, changing their portfolio or diversifying, for example. We provide risk assessment, or a business plan, or develop a new product. Our business plan includes the objective of having an impact of €1 billion in the Basque economy for the period 2015-2020 and we have the methodology that enables us to measure it.

1,400 highly qualified professionals

#23

among the EU’s 32,000 organizations involved in the FP7 Horizon2020 framework program

Why is innovation important for Basque enterprises and industry?

The only way Basque companies, taking into account their economic constraints in terms of costs and wages, can differentiate themselves from their competitors is in added value and innovation.

They have to invest in R&D. But it often takes a leap of faith, in particular for SMEs. This is where Tecnalia can help them assess the risks and carefully plan their innovative project up until it is rolled out. We help companies get to the closest point to the market, although there is always a point where they have to take the leap themselves. The Basque Country invests about 2% of its GDP in R&D and both the Basque government and the private sector agree that we should increase it to 3%.

Growing the Seeds of Innovation and Humanistic Values José María Guibert, Rector of the University of Deusto The first university founded in the Basque Country, in 1886, Deusto is a Jesuit institution. What are its unique competitive advantages compared to other Basque and European universities?

What really distinguishes us is our teaching model. Beyond the proper curriculums, we are very attentive to help our students develop Our teaching model is as a person in student-centered: all meanings of the term. To do we are very so, we pay close attentive to help attention to the experience and our students grow as persons.” conceptualization of each course.

Closeness to each of our students, tutoring and follow-up are also allimportant. Another aspect is that our degrees are crafted to respond to the needs of society and the economy, which is why we offer a series of combined degrees, for example in business and economy, business and law, law and communication, etc.

They attract a lot of candidates because they lead to good jobs. Unlike other universities, we do not have a lot of funding for research although we have started to gain some resources and have gone from 0.5% to 6% in the scale of our participation in the research output of the Basque Country.

You were named rector in 2013. What were your objectives then, and how far have you gone in achieving them?

One of the objectives was to open the university to the outside world, to business, social organizations and administration. Indeed, twenty years ago, Europe told its universities to get out of their ivory tower and to serve society. We have improved in research but we need more research that will have a social impact.

Bringing research closer to industry is a challenge we have before us, and we are reorienting our R&D departments towards business.

The Basque Country is consistently ranked as Spain’s most innovative region. How does Deusto University contribute to this effort?

To begin with, there is innovation within the university itself, in particular in the way we teach: our whole educational model has shifted to be more student-centered so that we support and evaluate our students better. Deusto is really a leader in this respect.

Now, concerning our impact on the economy, we have entrepreneurial programs in San Sebastian and Bilbao, with business incubators in both campuses.

Furthermore, we have now a series of new Master’s degrees on a range of novel subjects, all linked to innovation and the new economy.

One of the leading projects carried by Deusto is FabLab, which is part of a network headed by the Massachusetts Institute of Technology (MIT). What is the purpose of this initiative?

Inaugurated last year, FabLab is an instrument in the new industrial engineering degree created by Deusto in Bilbao. It is part of MIT’s worldwide network of labs where people can learn flexible manufacturing, which combines mechanical engineering and innovative creation.

Offering different know-hows and cutting edge machinery, FabLab gives students an opportunity to students create and make something.

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research groups in collaboration with Spanish and international universities

Spain has one of the highest rates of youth employment in Europe. How does Deusto contribute to give young Spaniards a future?

Economy and education are two separate matters. As regards education, the main problem in Spain is not university but secondary school, where our ratings are relatively low compared to the leading OECD* countries. Another problem is the suitability between what people study and the needs of employers. At Deusto, we gear our students towards the realities of the market, taking into account the fact that the Spanish economy has changed in the past few years, with industrial jobs disappearing in favor of the service sector. That said, the Basque Country is in a better position than the rest of the country. * Organization of Economic Cooperation and Development

The Most Innovative Utility in Spain Asis Canales, Director of Iberdrola How important is innovation to Iberdrola?

Iberdrola has been recognized as the most innovative utility in Spain and the fifth in Europe. The energy sector has great potential for evolution given that environmental challenges around the world require great technological and social innovation. It is therefore logical that our company is committed to innovation in renewable energies and that we have been recognized for these practices.

How does Iberdrola invest in R&D&I? We have a global R&D&I center and have invested 200 million Euros in innovation in the areas of efficiency, sustainability and energy-based products and services. We have a link with the Basque Science and Technology Network. We also set up Perseo, which is an 80 million Euro fund to finance new ventures and interesting start-ups for technologies that can be immediately applied to the market. Investments have been made in smart networks, renewable offshore energies, energy efficiency and maintenance efficiency for our plants.

Could you tell us more about the “Innovation with Suppliers” program?

We identify our needs and we present them to local suppliers and manufacturers who find a solution to our needs. We are technology users, not makers. We are innovative in our process and we pass on that innovation to our suppliers. This synergy between a utility company and the local supply chain has been a great success.

What do you think are Basque companies’ competitive advantages in innovation?

The Basque Country went through a crisis in its traditional, heavy-industry sector during the 1980s that left many companies destroyed. Industry was reborn through technology, the creation of clusters and a network of technological centers linking the universities with the industry’s needs. This allowed the creation of a tech-based industrial We see spent on innovation fabric, that although ourselves as a company that can small, maintains its position in the autogenerate value for motive, electrical and the stakeholders machine-tool indusmost innovative and for the supply tries. This is a skill utility in Europe differential where we chain.” can compete worldwide. The electrical equipment sector is in constant innovation and we need to be at the leading edge to maintain our mar- year Iberdrola began ket position. Furthermore, the collaboration between investing in renewable public institutions and the private sector is exemplary energies in the Basque Country.

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How is Iberdrola helping the internationalization of the Spanish and Basque supply chain?

Iberdrola is a multinational company with operations in the UK, Brazil, Mexico and the US. We identify markets where local demand is not fully covered by local manufacturers and we see this as an opportunity for Spanish companies to access these markets with their products. Ormazabal and MESA are two good examples, but there are others of varying sizes such as ZIV, Ingeteam and Artetxe. In order to introduce their products, they may have to adapt their equipment to be competitive in overseas markets as well as ensuring that the market is not too restrictive.

How has Iberdrola made a commitment to renewable clean energies?

We see ourselves as a company that can generate value for the stakeholders and for the supply chain.

We started investing in renewable energies in 2001. In 2015 in Paris, world leaders agreed to fight man-made climate change. At Iberdrola, we have been doing it for 15 years now. This is good news both for our stakeholders, and for the Basque Country as a whole, because Iberdrola and the Basque manufacturers have the know-how to put this country on the leading edge of renewable energy. It is a real success story.