NastaONE "BusinessONE, Euskadi" (English)

BusinessONE: Euskadi Basque Innovation Reaching the Sky

Report produced by NastaONE, published in The Economic Observer on February 16th. 2009 This report can be read online at www.nasta-one.com and www.eeo.com.cn Project Director: Patricia Pal Art & Layout Director: Manuel Lariño – www.mlarino.com English Translation: James Richard Thomas Southeran

02

Index

BusinessONE: Euskadi

Ana Aguirre

José Arana José Benito Apalategui

José Ángel Corres

Jesús Mª de Lapatza

Rafael Barrenechea

Iñaki Garmendia Aner Garmendia

Gustavo Lascurain Julián Echeverria

Markel Olano Arrese

Miguel Ortiz-Cañavate

Alejandro Aznar José Luis Muguiro Aznar

www.basques.euskadi.net www.sprichina.cn

www.valvospain.com

www.bilbaoport.es

www.amufer.es

www.danobatgroup.com

www.egamaster.com

www.pasaban.com

www.gipuzcoa.net

www.casinonervion.es www.hipodromoa.com

www.marquesderiscal.com

BusinessONE: Euskadi

Overview

03

THE BASQUE ECONOMY

T

he Basque Country's economy has grown significantly over the last decade to become one of the top four regions in the European Union in terms of gross domestic product at purchasing power parity.

One of the reasons for this economic strength is over a century of industrial tradition that has enabled Basque industry to be competitive and win a greater share of export markets.

The Basque government's industrial policy, investment incentives, and support for improvements in quality, innovation, and technology have resulted in its current levels of competitiveness.

In addition to the traditionally robust Basque financial sector, with the Bilbao stock exchange as a

infrastructure projects in international markets, among which the following areas are particularly noteworthy: steel-making, the generation and distribution of electricity, chemical and petrochemical plants, telecommunications, urban and inter-urban transportation systems, water treatment and supply, the treatment of urban and industrial refuse, environmental impact studies, and civil engineering.

Furthermore, this sector is related to a network of small- and medium-sized companies active in fields like aeronautics, telecommunications, energy, environmental management, biotechnology, industrial electronics, domestic appliances, machine tools, the automotive sector, chemicals, the maritime sector, paper, cork and plastic, glass, metalwork, electrical materials, furniture, and engineering.

Loramendi

Italy, Germany, the Czech Republic, Spain, China, South Africa, France, Bulgaria, and Korea. At the China Metal Exhibition trade fair in Shanghai in 2008, we reached new agreements to supply two new VMMs in 2009.

As a consequence of a concerted internalisation policy the company began at the end of the 1980s, Loramendi has its own subsidiaries today in Detroit (USA), Monterrey (Mexico), Reims (France), Dusseldorf (Germany), Cape Town (South Africa), Pune (India) and in Beijing, in China.

Our future is focused on developing integrated casting solutions, principally for the automotive and truck sectors.

China has been our priority market since 1990. We set up our subsidiary in Beijing in 1997 and, over the last few years, around 20% of our sales volume has come from China.

To date, we have installed more than 50 machines, working with clients in China like FAW, Weichai, China Yituo, Jiangling Motors Company, Huadong Teksid, First Tractor, Shanghai Diesel, Jiangjing Lianhua, Henan Wanxiang, Greatwall Baoding, Gem Duo, Dong Feng. Anhui Jianhuai, Yuchai, Changchai, Shandong Liancheng, and Nanjing Taining, among others.

Loramendi is, and will remain, heavily involved in the Chinese market in order to to develop shared strategies with Mondragon Corporation's subsidiary in the Kunshan industrial park, producing peripheral casting equipment together

shining example, there is also the rapid development of the latest services for business, the modernisation of trade – in which the Bilbao International Fair plays a major role – and the growth of tourism.

This economic development has had positive effects on the level of unemployment, which has been decreasing since 1999 and stood at an average of just 3.3% in 2007, the lowest figure in the last decade and well below the average for the European Union.

Although its foundations were laid by significant business investments made in the Basque region, Euskadi has begun to ready itself for the challenges of globalisation. To ensure this is successful, Basque public institutions and privatesector organisations are combining their efforts to map a route that will lead to a new socio-economic policy that is more competitive and more human.

For more than one hundred years, the Basque Country has been one of the most important industrial areas in the Spanish state and represents one of the most significant financial hubs in the European Atlantic region.

INDUSTRIAL SECTORS Internationalisation, innovation, technological specialisation, energy efficiency, quality, and training are the motors that have driven industrial companies in the Basque Country to reach the highest levels of competitiveness in the European and global marketplace.

In this context, one of the most important Basque industrial sectors is capital assets, which, today, is very experienced in turnkey developments of major industrial and

Fernando Corres Loramendi www.loramendi.com

semi-cooperative model, similar to that of the major international consultancies. Fernando Querejeta, its Chairman, reveals the philosophy of a company that is in constant evolution: “More than 13,000 projects for 5,000 clients are our guarantee. We have professional ambition, are committed to our clients, work as a team and, given the unique nature of the company, all of the professionals who work here will one day have a share in the business. We do not have employees, but rather look for partners or future partners. Idom is wholly owned by the people who work for it. We have a system by means of which our professionals can acquire ownership shares once they have been working for us continually for at least 10 years, if they take part in Idom's culture.

Every member of our workforce can benefit from this system, independent of the position they hold.”

Idom, which means “Dirección de Obras y Montaje” (Project Management and Implementation), has always been attractive for professionals, and the quality and good results of our projects have always been our best reference. In fact, our engineers are behind major projects

ture business, which we provide through ACXT, will undergo extraordinary expansion. ACXT Arquitectura is one of the driving forces behind Idom's growth and could well be very important on an international level. The Guggenheim was an example. Now, perhaps, the construction of the Peking Business School, financed by the European Union and the Chinese Government, will be another. Yet another reference is the Shanghai Business School, designed by I.M. Pei, a well-known Chinese architect who is resident in the United States. We possibly have the largest architecture studio in Europe with a team of more than 200 architects, out of a total workforce at Idom of 2,500 professionals.

We have a good portfolio of projects, and in 2007 closed the fiscal year with a turnover of 300 million euros. Our workforce numbers more than 2,500 people, and we are working towards billing around 600 million euros by 2010.

Half of our total sales are overseas and our target markets, aside from Spain, are the nations in former Eastern Europe, North and South America, India, and China.”

TUBOS REUNIDOS, LEADING THE SEAMLESS TUBING INDUSTRY Tubos Reunidos was established in 1892 and today leads a group made up of a total of nine companies, active in different sectors.

TRADE AND TOURISM Even though the economy is heavily industrialised, other sectors have also witnessed promising levels of development in the last few years. This is the case with the trading sector, which is now sizeable, and also the tourism sector, which is becoming more and more important to the Basque economy.

LORAMENDI Loramendi is a company from the province of Alava which works in the design and supply of integrated casting solutions, machines for vertical moulding, individual machines, and complete production lines for the manufacture and assembly of patterns for the manufacture of engine blocks and covers.

It also offers integrated solutions for the automation and assembly of aircraft parts.

Loramendi is a world leader in the design and manufacture of cast machinery for the automotive industry, as well as serving as a model for the potential of the Basque Country's business fabric, and its reach and impact on a global scale. Its Chairman, Fernando Corres, explains why: “Loramendi was established in Vitoria in 1973 and, since 2005, has been part of Mondragon Corporation. With a total annual sales volume of more than 30 million euros, it employs 115 people in its main factory and 33 people in various subsidiaries.

Loramendi is a leading provider and sub-contractor for companies like General Motors, Ford, Daimler, Chrysler, Renault, BMW, Volkswagen, Volvo, Scania, Tata, and others, as well as for foundries like Bruhl, Fritzwinter, Cifunsa, Technocast, Nemak, and Autovaz.

We have installed VMMs – vertical moulding machines – in countries like the United States, England,

Fernando Querejeta IDOM www.idom.es

The group's production is carried out in three factories which have a total annual production capacity in excess of 375,000 tonnes of tubes, providing work for more than 1,900 people.

IDOM

with our Chinese partners, and maintaining the technology, quality and reliability that has seen us both recognised by, and deserving of, the confidence of our clients.”

IDOM, THE ENGINEERING THAT BUILT THE GUGGENHEIM The leading company in the Spanish market for professional services in engineering, architecture, and consultancy, Idom, has taken giant steps to become active in the international marketplace and has consolidated itself as a name to be reckoned with. Idom has 52 years of experience in the field of complex engineering projects. The company was established in Bilbao in 1957, and changes in the market and in clients' demands have seen Idom commit to continued growth, in services as well as personnel, transforming it into a leading, multi-disciplinary group where, today, more than 2,500 professionals actively work in 28 offices, located in 11 nations on three continents.

Idom's structure is based on a

In the seamless tubing manufacturing sector, which is their primary business area, the Tubos Reunidos Group is active under the brands Tubos Reunidos, S.A., Productos Tubulares, S.A, and Aceros Calibrados, S.A. (ACECSA), making it the leading manufacturer of

Pedro Abásolo Tubos Reunidos www.tubosreunidos.com

drawing processes. Our wide range of products responds to the needs of different industrial sectors: the petroleum industry – both in terms of extraction activities and petrochemicals – the automotive industry, energy, the mechanical construction industry, and the construction sector in general.

In order to guarantee the highest quality and service in seamless tubing, we have installed the optimum means of manufacture and control in both our foundries and our tubing factories. We have the latest quality systems, which have enabled us to receive homologation from international bodies, manufacturers, engineering companies, and end users, among whom the biggest petroleum and gas companies in the world are to be found, as well as companies from the automotive sector.

Our longstanding presence in the marketplace since 1892 confirms our dedication to service and constant adaptation to the different needs and demands of our clients.

That same dedication to service means that the products produced by the Tubos Reunidos group are present in more than 100 nations today. Our company has more than 2,000 clients around the world, with more than 30 years' experience tives worldwide.

Our leading competitive and differential advantages are based on our very experienced and highly qualified human resources, who are committed to quality, respect for the environment, and productivity.

We have the latest management systems in place, created and designed to comply with our strategic objectives, and our ability to adapt to the constant changes in our markets is demonstrated by a policy of maintaining close and personalised relationships, both with our clients and our suppliers.

Our efforts in investment, and

like the Guggenheim, the Marques de Riscal Winery (also by Gehry), the BEC, or the Aceria Compacta de Bizkaia. Franck Gehry has admitted that, without Idom, the miracle of the Guggenheim would not have been possible.

Among the principal references Idom has in China is the fact that CEIBS – China Europe International Business School – Asia's leading business school, has decided to build a new campus in Beijing and has hired Idom to look after the design and architecture.

This new campus will be located on a 33,100 square meter plot inside the Zhong Guan Cun Science Park, outside of Beijing.

“In our specific case, energy projects probably make up the largest part of our internationalisation, even though we are also undertaking important projects in the fields of architecture and various studies by our consulting arm. There is a huge market in energy, the environment, and the provision of advanced technology services. In addition, our architec-

Tubos Reunidos

seamless tubing in the Spanish market and one of the most important companies in the sector worldwide.

Pedro Abasolo, its Chairman, explains: “Tubos Reunidos' range of seamless tubing comprises various products manufactured by means of hot lamination or cold

research and development have enabled us to install cutting-edge technology and supply a wide range of high-quality products, making Tubos Reunidos the number-one producer in Spain and one of the leading companies in the seamless tubing sector in the world.”

04

Introduction

BusinessONE: Euskadi

Basque Country, Excellence in Industry and Technology Infrastructure 120 Basque companies produce leading products worldwide. No other territory in the world concentrates such efficient industrial system in so little geographical space as the Basque Country.

the creation of knowledge.

As its primary objective, this second economic transformation has the goal of making Euskadi into a reference in the European area for research and technology, and builds on the principle of total quality as a means of managing organisations.

Almost 30% of our GDP comes from the industrial sector and that represents an enormous strength.

For example, at this time of international financial and economic crisis, we are suffering less than others because our productive structures are more balanced. We are concentrating on industries that are highly diversified in markets all around the world. We produce high-value-added products, and in more speculative sectors such as construction, are much more focused on civil engineering – on infrastructure and public works rather than residential building, where we have a much smaller percentage of our jobs and our economic activity.

Ana Aguirre Councillor for Industry, Trade and Tourism BASQUE GOVERNMENT www.basques.euskadi.net www.sprichina.cn

C

ould we begin with an introduction to Euskadi's competitive and differential advantages from a business and economic point of view:

Taking into account that we are talking about China, we should start by saying that, even though we are a small nation, we have thousands of years of our own culture, which is also reflected directly in our industrial and economic policies.

We are a country with a clearly industrial tradition that has been able to transform and adapt itself to the present day. We have understood how to take part in globalisation in two fundamental ways:

firstly, by maintaining industrial policies which are focused on promotion and which are in touch with the needs of our own productive fabric over the passage of time and, secondly, being very open to the world, understanding other realities, and conducting trade with other countries.

A very significant part of our production is exported, which is to say that our own internal market is increasingly less our primary market and that our companies are present around the world. Our intention is to continue to benefit from the advantages of globalisation to create new trade networks, alliances, and exchanges which enable us to strengthen both our bases and the competitive position of our companies on the global stage.

Over the last two decades, the Basque economy has seen massive transformation and modernisation.

We have undergone a process of major industrial diversification and tertiarisation of our economy. It has witnessed very strong rates of growth and employment, well above the EU averages, and this has resulted in convergence in terms of income per capita.

However, at the beginning of the present decade, the impetus behind these factors was waning and the formulation of a new economic strategy was becoming necessary, with the aim of accomplishing the so-called “second economic transformation” of Euskadi: a society that has reached the level of development which Basque society enjoys today, considering the future in terms of innovation, quality and

Throughout the last 30 years, we have also made a very important effort to educate our people and, at this point in time, Euskadi's active population boasts an especially high level of education: we have more and more qualified people with secondary and university educations and professional training, and so human capital is another of our most valuable assets.

This has allowed us, in turn, to give a major push to the other factor that has been one of our biggest initiatives: to constantly increase our investment in R&D and innovation in all types of economic activity, revising the transformation process and moving from producing medium-technology manufacturing to higher-tech. Those high-tech products now take up an increasingly large share in our range of exportable products.

In order to do this, we have intelligent infrastructures, which is to say a huge network of technology parks in our three provinces – Alava, Gipuzcoa and Vizcaya – with a total of 364 companies who employ 12,666 people and whose turnover is in excess of 2.9 billion euros.

All of this is tied to another very important competitive advantage, which is our financial, budgetary, and fiscal autonomy. The fiscal and financing system in the Basque

Country has its own characteristics, and its unique nature ensures that Euskadi has its own taxation system with the capacity to regulate and manage that is normally only held by national fiscal authorities.

This enables us to distribute our resources according to the priorities that we ourselves establish in economic policy, in restructuring programmes in times of crisis, in social spending, and in environmental and infrastructure policy.

This is one of the fundamental elements that make up this nation's ability to transform itself, and to adapt very quickly and with great flexibility, to the changes that have taken place over the last 30 years.

Twenty-five years ago, we were in the middle of the second oil crisis,

At this point in time, there are 83 Basque companies present commercially or productively in China, with 50 productive installations, and 47 commercial offices.

For a country of just 7,000 km2, that's a very important presence.

and still suffering the effects of the first from '73, with a completely obsolete industrial sector as we were a country with very mature industries: steel-making, shipbuilding, and very traditional sectors.

That was falling to pieces around us and so we decided to specialise in those areas where we were good and in what we knew how to do best, and then diversify away from these using the skills we had into other economic sectors where we could apply the knowledge we had acquired.

In this way, we continue to produce steel and manufacture ships, but now do so in a radically different way from that of 25 years ago. We adjusted employment while maintaining a social balance that

any economic restructuring requires and started to diversify towards new activities. We began to generate a machine-tools sector which became increasingly stronger and into which we incorporated the aeronautical sector thanks to the knowledge we had in sectors like machine-tools and automotive components, or from traditional sectors like foundries. At the present time, we have the most modern steel foundries in Europe.

From an energy point of view, we are a worldwide reference in wind power. We have positioned ourselves as a source of renewable energy generation and there is a major industrial initiative behind the wind-power sector to generate new products and new activities for all of our companies.

The crises you had to face have turned out to be the catalyst that enabled Euskadi to become what it is today, because you knew how to reinvent yourselves...

Exactly, but we still have a long way to go, because we believe that our diversification plans must also be applied to much more intensive sectors.

By this I mean that, even if we develop our existing industrial sectors to their maximum levels of performance, we would not have the R&D and innovation component we need to have, so we have to incorporate new economic sectors into our current areas of activity.

In this sense, our initiatives are focused on the BioBasque strategies, which is the name given to the whole range of activities and organisations involved in the bioscience field. The bioregion is the result of a collaborative effort by the academic world, the health system, and industry, backed up by a vast infrastructure network and the public sector, which facilitates business activity. Biotechnology and nanotechnology are precisely directed at generating new sectors which are very intensive in terms of knowledge, and in research and development, which permit us to create new high-value-added products in order to maintain our economy's productivity.

Economic growth can be achieved in various ways: with lots of jobs, or through the value produced by each person who works.

Guggenheim Bilbao Museum

BusinessONE: Euskadi

Introduction

05

Photography - Mikel Arrazola

Our productivity is very high, and that directly impacts on the living standards of Basque society. But those living standards have to be maintained and even improved, and that is our goal: to continue to invest in and develop R&D and innovation on an ongoing basis, to add more value to what we produce, and, in summary, to specialise in very high-value-added products and services that, on one hand, enable us to maintain the salary levels and living standards of our citizens and, on the other, differentiate us from emerging economies and from other competing nations.

You also provide a lot of support to Basque companies that are undergoing the internationalisation process.

We are a government that is very much in touch with the needs of our companies. We establish close relationships with our businesspeople and get involved in their concerns, in their worries and in their problems. Their opinions are very much taken on board by the whole government team.

Businesspeople have a role to play, together with us, at every step of the diagnosis of the economic situation, in the analysis of our vision for the future, and in the development of policies and programmes for concrete measures that we develop in government over the four years that make up each legislature.

We also enter into the internationalisation process with them,

Our bet on China is a long-term one, because we want our companies to continue to do business there in the future.

because when we provide assistance to a company to internationalise, that company creates new opportunities and also grows from the ground up.

We support our companies as they try and conquer the world, because Basque companies have great products, have great managers, and know how to make the most of the opportunity to open up new markets and, in order to do so, they have to produce wherever they find the best conditions and that has a lot to do with China.

So that they can enjoy another aspect worthy of mention, the high quality of life in Euskadi?

Without a doubt. The Lehendakari (the President of the Basque Government) is fond of noting that, if you were to compare human development indices worldwide, if Euskadi were a sovereign state it would come third on a global scale.

We have an income per capita that is 141% of the European Union level, which means we are well ahead of the European average.

Our population is also very balanced, because there are 2.1 million inhabitants but, more recently, there has been more immigration than emigration, meaning we are not losing people.

It is also true that we don't have a very high number of immigrants and that the increase has been very gradual so, as a result, the integration of immigrants in Euskadi is being managed in a pretty controlled way. This is a very important issue as our unemployment figures are very low.

Basque Gastronomy, a worldwide reference

A region moved by vibrant culture

You have one of the busiest jobs in the government: industry, energy, tourism, trade, and consumption. Let's talk about tourism, as Euskadi is a land with its own special gastronomy and geography.

I come from industry, and less than a decade ago, I would never have imagined that Euskadi could ever become an important tourist destination, but our policies are increasingly interdependent and complementary. Even though our industrial traditions already enabled us to have a large amount of conference tourism, we had not realised it was a niche that had masses more potential for development.

Looking at consumer behaviour, we realised a real change was taking place with how people were consuming: beach and sun holidays were in decline and other aspects such as gastronomy, culture, and identity, which is to say all of those differential elements that tourism experts call the “experience”, were on the rise. In that respect, in terms of “living the experience”, we had lots to offer: the chance to enjoy our natural beauty, art and culture, take part in our festivals and celebrations, to shop and, of course, to sample our gastronomy.

And, added to that revolution in tourism, was another very attractive and important element, the establishment of the Guggenheim Museum in Bilbao, which was not only the catalyst for the transformation of Bilbao, but also gave weight to the idea that we could link different resources and characteristics to our tourism offer, and that we could also market these year-round and not just in the summer. The Guggenheim really put us on the map and is a reference around the world, especially in those specific

La Concha beach

segments which are of interest to us: selective, high-quality tourism, because our product is not a low-cost one.

As a small country, positioning ourselves in terms of tourism is not easy, and tourism is a sector where competition is fierce, so we had to make sure we did it well and, above all, aimed at a medium- to high-end segment of tourists, who are the best placed to appreciate what we offer: visiting the Guggenheim Museum; staying in the Marques de Riscal hotel in La Guardia, Alava, which was also designed by Frank Gehry; visiting the Rioja vineyards of Alava, which are true works of art; eating in Getaria; visiting prehistoric sites; mountain biking; shopping; taking walks across the suspension bridge, and so on.

Let's now talk more in detail about the presence of Basque companies in China

economic power in the last few years, but the interest that Basque companies have in China goes back a long way, above all in sectors that have long been undergoing globalisation and which were the first to position themselves in international trade, such as automotive components, machine tools, domestic appliances, manufacturing and, at the moment, also wind power.

From the year 2000 on, both exports to and imports from China have multiplied considerably.

Exports have grown by 400% and imports by 150%. We are still in deficit, but our commercial relations with China are very important and China is, at the current time, our seventh largest supplier and our eleventh biggest client.

At this point in time, there are 83 Basque companies present commercially or productively in China, with 50 productive installations, and 47 commercial offices.

For a country of just 7,000 km2, that's a very important presence.

You have to approach China with a lot of respect and understanding, because it is a country that is so large that you have to appreciate that there are many Chinas: the rural part and the urban part; the coasts and the interior... It is as if a Chinese businessperson was talking about coming to Europe: Europe is a bloc, yes, but there are many different realities within it.

China has emerged as a global

China is a country with tremendous

“Txalaparta” tradition

potential and is proud of having a centuries-old, marvellous culture, but you also have to overcome obstacles which are not so simple, such as the language, cultural and administrative differences, legal guarantees and so on.

We have organised numerous days, both here and in China, to provide our companies with the necessary backing, both before they leave and in their destination. We opened up platforms in Shanghai and Beijing to do so, and we are increasingly in contact with local authorities and not just the central government, because that is where we are most interested in building a credible country brand, of trust and confidence, based on a win-win approach.

China is the world's leading producer of steel, and also of university graduates, researchers, scientists, and patents... These are all astronomically high and if you go to China with the pre-conceived idea that everything there is just “low-cost”, you are very wrong, because China has the need to grow and is making a massive effort to produce products that are more and more sophisticated and with high added-value.

Our presence in China is increasing and the more we get to know the market, the better we will understand and respect the rules of the game there, and so our chances of establishing more interesting joint ventures will grow, because we understand the business culture of the country and that is very important when it comes to doing business. Our bet on China is a long-term one, because we want our companies to continue to do business there in the future.

SPRI Shanghai Representative Office Mikel Yang Rm.1902, LIPPO Plaza,No222 Huaihai Middle Rd., Luwan District, Shanghai, 200021 P.R. China Tel.:(0086 21) 63906376 / 63906378 Fax:(0086 21) 53966675 / 53966380 Email:mikel@sprichina.cn Website:www.sprichina.cn

At present, there are 120 Basque companies whose products are leaders around the world, with a sizeable presence and relevance on an international level, and which satisfy the demands and the needs of clients all over the globe.

Our commitment and support to Basque companies and our society in improving competitiveness is absolute and comprehensive.

Through the SPRI – the Association for the Promotion of Industry – we create and develop a series of conditions and factors designed to achieve greater levels of competitiveness for our economy, improving our companies' capacity to develop, innovate, grow, and internationalise. We also want to benefit from the presence of our SPRI offices in China to reinforce efforts to bring more Chinese visitors to Euskadi.

Miramón Technology Park

06

Valves Industry

BusinessONE: Euskadi

tial, so when Valvospain was created we decided to appoint Jose Benito Apalategui, a person who has lots of experience and a brilliant career in the valve sector, as chairman of the board.

The adoption of a new structure controlled by the chairman of the board, who supervises the managing directors of each company and their activities, enabled us to diversify the products of each company.

Mr Jose Arana Chairman Mr Jose Benito Apalategui Chairman of the board VALVOSPAIN www.valvospain.com

V

alvospain is a European group – comprising Lázaro Ituarte Internacional S.A., MTS Valves and Technology S.L., and Fluval Valves UK Ltd. – that manufactures high-value-added valves. It was established with the objectives of expanding production, maximising synergies, and offering greater value to clients in terms of quality, service, and innovation, all at competitive prices.

How was Valvospain, which has proven to be such a good idea, created?

J.A: Valvospain is the result of the merger of Lazaro Ituarte, MTS, and Fluval, three very important companies in the valve sector.

Lazaro Ituarte, for example, has over 120 years' history, even though, for a time and mostly because of poor management, it had become a problem company until the Basque government took a share in it with the goal of finding a partner, which turned out to be Juan Luis Arregui.

Arregui, who is also vice president of Iberdrola and president of Ence, took control of Lazaro Ituarte and led the company forward, and today

is an active partner in Valvospain.

Fluval, of which I'm the owner and president, was developing its commercial activity overseas and began to purchase Lazaro Ituarte products, until we became a very important strategic client for them.

J.B.A: Once the group was established, we held some strategic seminars and the first thing we did was remove internal competition among the companies, and adjudicate the products and markets each one would deal with specifically.

We also decided that each of the companies had to have its own personality, that it should have its own organisation within the group, adopting a management style based on teamwork and aimed at efficiency, with powerful IT systems to promote market development, homologations, and product development, modern management methods and, all of this, thanks to human resources with lots of experience in the sector.

These parameters have enabled us to achieve significant success as a group.

Eventually, Mr Arregui and I met and we realised there was a series of major potential synergies between our companies, so we decided to merge.

J.A: Today, with little more than two years' history, we can confirm that the decision to unite the three companies was a great idea, as none of the three, independently and separately, would have achieved the kind of development the Valvospain group has.

My profile is very commercial, Mr Arregui's is more financial, and so we only needed the industrial element to undertake the project. I contacted Eduardo Ortiz, who was the director and owner of MTS, and, after much negotiation, we managed to convince him to merge all three companies, and so Valvospain was born.

J.B.A. This merger allows us to take on larger projects and the companies' support structure is more robust, which accelerates the dynamic and speed of their development. Also, together as Valvospain, we can position ourselves more forcefully in the international context and compete with global giants.

Today, the three companies which make up Valvospain produce and supply a wide range of valves that offer solutions for fluid manipulation in a large number of applications and sectors, such as petroleum, gas, LNG, chemicals, petrochemicals, energy generation, onshore plants, offshore platforms, mining, and other industries.

What is the current structure of your business units?

The project really had lots of poten-

J.B.A: MTS is basically focused on oil and gas, and on desalination and water treatment, but it is now developing another business area in the solar energy sector – an important renewable energy – and also a specific sector in oil and gas: alkylation valves. This is an important market niche, and our goal is to

get homologation in order to develop this.

obviously, and a network of agents.

Another of the important products we're currently developing is cryogenic valves, which are basically aimed at the gas sector.

How many employees do you have and what is your current turnover?

As regards Fluval, it is essentially focused on the oil and gas sector today, so it does coincide with MTS from a market point of view. That's to say that MTS served and was present in a number of markets which were entirely complementary to those served by Fluval in the past. Therefore, in this case there was a market rationale to maintain this business unit in both companies.

worldwide

J.B.A: We have around 300 employees. Our turnover is around 80 million euros, and our forecasts from now until 2012 should see that grow to more than 180 million euros, thanks to organic growth.

We are also looking at incorporating other valve manufacturers into the group to complement our

which enables us to market our high-value-added products such as cryogenic valves and, in short, all those products that require European know-how and technology.

Achieving sales penetration in the Chinese market is not easy, because you have to find the right people to manage it, but we've been successful.

In fact, we are now undertaking a very sizeable project with SINOPEC, who awarded us a very important engineering contract last

Finally, Lazaro Ituarte fundamentally serves energy companies, but also the oil and gas sector with Thru-conduit large-dimension values, but only for very specific uses. In oil and gas, we include everything from petrochemicals, to refineries and chemical plants.

Lazaro Ituarte is focused mostly on cryogenic valves, a new business unit we are developing in the mining and slurry sectors.

As a result, we have not lost the competitive advantages that each company had on its own, as they complement one another in other market development roles. All of our valves are very innovative products. In Spain, for example, we are the only manufacturers of this kind of valve for the solar energy sector and, in desalination, MTS is the world leader right now.

If there are 80 desalination plants worldwide, we have made the valves for about 75 of them.

What are the primary objectives and ambitions of Valvospain worldwide?

J.A: The market sets our objectives.

Our primary goal as a group is to serve our clients, whatever their needs may be.

J.A.B: With the creation of Valvospain, we have gained a much more global business perspective and now have an almost worldwide presence.

From a management point of view, we have acquired a wider and more universal vision, dealing with the technological reasoning behind products and manufacturing technologies, quality, homologations, and IT applications.

In terms of reasons for purchasing, in the past, perhaps, products which required high-added-value were focused on local providers. Today, the area of influence is global and so the vision to develop providers anywhere in the world is a criterium we have incorporated at every level in the organisation.

J.A: That also enables us to be alert and have the necessary flexibility to maintain competitiveness in the marketplace, above all in China.

The three companies that make up Valvospain were already present in China from a procurement point of view on an individual basis, one of them with great success.

Today, we are involved in an important project on a group level which will enable us to accelerate our competitiveness in China in terms of price, quality, our own procurement organisation, planning, and when it comes to getting homologations. In China, we have a significant structure to serve our clients for conventional products, as well as a number of factories that manufacture products under our brands.

J.A: As Valvospain,we have group companies in the United Kindgom, in South Africa and in Dubai, as well as Fluval in Moscow. As MTS, we are present in the USA – in Miami – and also in Colombia, where we have a project to set up our own operation.

We also have Valvospain employees working in Japan, Dubai and the US, as well as Spain and China

Cryogenic Valve

products and our markets, which would help us keep growing by acquiring companies which we have an affinity with and which can be integrated into the business philosophy and culture we are developing, wherever they are in the world. On the basis of these acquisitions, our objective is to double the group's turnover from now to 2012.

We have begun 2009 with practically all our sales forecast for the year already secured.

What does China represent as a market for Valvospain and what are your ambitions there in the medium and long term?

J.B.A: On one hand, in China we have a clear consolidation project in our productive, procurement, manufacturing, quality control, and homologation activities in our Chinese factories, basically focused on commodity valves, where the principal purchasing decision is price, but with added value thanks to their quality.

To achieve this, we have set up our own infrastructure for the management of each process: quality control,design, development of factories, controls, final testing, etc.

On the other hand, our objective is to enter the Chinese market as an important sales outlet for high-value-added products which require the fulfilment of complex specifications, know-how, cuttingedge technology, experience and financial backing.

Valvospain could provide China with exactly what it needs right now...

J.A: Exactly. With our types of product we already have 15 years of history in China, first through MTS and Fluval, and later with Lazaro Ituarte.

But the valvemanufacturing industry has suffered a significant decline worldwide. In Spain, for example, there were previously 30 or 40 manufacturers and now there are just 10 or 12. In England, there are none left now and just three in Germany.

In China, in comparison, 10 years ago there were 300 valve manufacturers and today there are 2,000. So, in one way or another, the whole world is already working in China, whether that be in procurement or manufacturing.

Our involvement in China is different. We want to have a fixed presence there, for the long term,

September when we were in competition with the most prestigious manufacturers from around the world. In March, we are going to produce valves here that will be really spectacular in terms of size and design, as well as manufacturing complexity.

As a result, we need to have a great, highly qualified team who can convey our industrial philosophy and know-how to China.

Strategically, China is one of the most important commercial markets right now and, for the last two years, we have had a person there called Mikel Plazaola who is working really hard with lots of Chinese people to carry out the commercial development we hope to see there.

The order we've won in China is a very important milestone for us, because it will be a reference that positions us in the market as a group which is able to manufacture according to specifications, to a timeframe, to quality, and with good communications with the client.

That will be our best recommendation in China, the best presentation we could have, because, thanks to this job, Chinese traders and sales companies linked to important clients will come directly to us to discuss new projects.

As a valve-manufacturing business group, Valvospain's goal is to become the world leader in the sectors where we are active, and ensure all those people who are part of our organisation have a level of training and know-how that enables us to dominate all the processes involved: design, marketing, manufacturing, and quality of valves.

That will be our principal defining characteristic in the demanding and fiercely competitive global market.

VALVOSPAIN SHANGHAI LTD. COMPANY Address: Nº 285 Tian Gong road JinShan Industrial Zone nº7 Workshop.

Shanghai, P.R. China Contact: Mikel Plazaola, Managing Director Valvospain China Tel: 008613817468764 E-mail: mplazaola@valvospain.com

BusinessONE: Euskadi

Maritime Infrastructure

T

he competitive and differential advantages of the Port of Bilbao, compared to other ports on the Atlantic route:

Bilbao is the leading port on the Atlantic Arc in terms of volume, capacity, and infrastructure. From the Far East, Spain is basically seen as a Mediterranean nation, but it is worthwhile highlighting the location of Bilbao as the principal port on the Cantabrian coast and one of the largest in the country.

Another of the most important competitive advantages of the Port of Bilbao is that there are no limits on maritime transportation. Last year, the amount of goods traffic beat the record again, with some 40 million tons moved. Supertankers and the largest container shipping firms sailing the oceans are coming to Bilbao, because we are able to handle vessels of any type and size without any restrictions due to tides, draught, cargo loading and unloading methods, or storage dimensions. We also have a large network of direct and feeder maritime connections that link up to the principal ports across Europe.

For tanker-vessel traffic, we have 32 metres of natural depth, and for dry cargo ships, we now have operative berths of up to 22 metres.

If we take into account that, at present, some European ports are undertaking work to increase their depth by artificial means in order to reach 17 metres, it is worth pointing out that the Port of Bilbao has 21 metres of natural depth. This contributes to the positioning of our port as a home base for transoceanic shipping lines.

Our installations have all the facilities required to handle and store all kinds of goods: scrap metal, steel products, machinery, cars, timber products, cereals, fruit and vegetables, specialist ships,

Bilbao into a home base for international cruise-ship routes. Doing so would create a very sizeable population nucleus, with a much greater impact on the local economy than there is today, and more spending in hotels, restaurants, and shops.

vessels that are coming into operation in global maritime transportation.

Since 1992, Bilbao Port Authority has invested almost 600 million euros in expansion work to add two million square metres for port activities, and has constructed 3.25km of new dock with a depth of 21 and 23 metres.

The Basque Country has many attractions which are perfect for short trips, visits to the Guipuzcoan and Cantabrian coasts, and the vineyards of the Rioja region.

Burgos cathedral is also not far away, the caves at Atapuerca, the world's largest Rolls-Royce car museum – just a few kilometres away from the port – and a series of important archaeological finds, make our offer very diverse and attractive, headed up by the Guggenheim museum, of course.

This offer has been strengthened by the introduction of the first “motorway of the sea” in the European Atlantic Arc, a service for containers and trailers (Con-Ro) that links Bilbao with the Belgian port of Zeebrugge three times a week. With this new shipping line, companies and transporters save time and money, as prices are very competitive for distribution between the Iberian Peninsula and the Benelux nations, Germany, and northern France.

We are not Rotterdam, where there may be as many as 200 million people in the immediate surroundings. In our immediate area of influence, there are 16 or 17 million people, but it's also true Rotterdam now has to dredge its access channels. We can say there are no limits to operations in the Port of Bilbao and setting up here can be done in the time that it takes to process an administrative ruling, which works out to be a period of around two months.

All of our docks have direct connections with the A-8 and the A-68, routes which have direct access to the highway networks of Spain, Portugal, and the rest of Europe to provide door-to-door services. They are also connected to the national railway network with direct services to dry docks and logistics platforms in strategic locations all around Spain, as well as in the outskirts of Madrid.

As a result, we have ideal conditions to provide a practically immediate response to all current demands.

It's obvious that China has changed the world's political and economic centre of gravity. How does the Port of Bilbao see the Asian giant?

Mr Jose Angel Corres Chairman BILBAO PORT AUTHORITY www.bilbaoport.es ports of Shanghai, Quingdao, and Changshu. In 2007, 1.5 million tons were moved on behalf of the Asian giant, which added up to 50% increase with respect to 2006.

Ninety-three percent corresponds to imports coming from China and 7% to exports from Bilbao.

What is the current situation and the perspectives for the future in the cruise-ship sector?

Traditionally, the Port of Bilbao has basically had an industrial profile, even though, at present, we are undertaking a major marketing effort to become a commercial port as well.

Eleven years ago, we had no cruise-ship traffic, but since then we have continued to grow, making investments to create the necessary infrastructure, improving them in line with demand in the port, and undertaking a concentrated promotional effort, with a presence in the most important national and international trade fairs.

Since the end of the 19th century, when we exported iron ore, until the present day, when we are importing and transforming it, our history has been tied to the world of steel-making products.

In the past, we drew on raw materials from local sources and had blast furnaces working here until 1996. Since then, and after Europe-wide campaigns of rationalisation and restrictions on production, we have provided services to the large steel-making groups that have grown in Europe and, from 2005 on, Chinese steel products have appeared in the marketplace.

High capacity ship

hydrocarbons, chemical products, and oils. Our offer is complemented by warehouses for customs storage, duty-free storage, and bonded storage.

Traffic with China has grown in a spectacular fashion over the last few years. How have you achieved such a significant increase?

For long-distance routes, it is also worth mentioning that our infrastructure for container traffic offers the best possible conditions, especially for traffic with China, the United States, and Brazil.

In the last seven years, we have organised four trips to China through UniportBilbao, the association that represents the interests of public and private-sector companies operating in the Port of Bilbao.

In summary, Bilbao today is the bestprepared port for container traffic from the South Atlantic European area, from Le Havre to Algeciras, and our traffic is not transit-based, like other ports, but generated from within our hinterland.

At the same time, the emergence of China into the global market explains the increase in general goods traffic, as a natural reflection of globalisation.

What are the most noteworthy aspects in terms of infrastructure at the Port of Bilbao, which guarantee accessibility and competitiveness?

A good number of the leading Spanish ports are now undertaking expansion work which we already planned back in the '80s and carried out in the '90s. As a result, that infrastructure has been working for years in our case, which enables us to provide services today to the new

At this point in time, China is the second largest market for the Port of Bilbao in dry cargo, third in container traffic, and eighth in terms of total volume.

Bilbao is the fifth port in Spain in terms of traffic with China, and the leader in the north of Spain. If we remove transshipment from the total amount of traffic, Bilbao is the third Spanish port in terms of traffic with China.

The goods we receive from China come, for the most part, from the

From that point on, our development has been enormous.

Previously, supply was served by small ships of 2,000 and 3,000 tons, but that has changed and given way to huge 30-35,000 ton vessels carrying steel products which come from the Far East.

These ships do not make calls at every port, but go to specific hub ports and we have set ourselves up as the leading Spanish home port on the Atlantic.

For containers, we also have a very large market share, in excess of 554,000 TEUs. What is the financial value of the Port of Bilbao, both in terms of the GDP of the Basque Country and in terms of employment?

The contribution that the whole port community makes to the surrounding economy reaches some 558 million euros, which represents 0.84% of the GDP of the Basque Country and 1.6% of the GDP of the province of Vizcaya.

As regards employment, Bilbao provides about 9,664 jobs as the leading port on the Cantabrian Sea: almost 1% of all those in Basque Country, and 1.86% of Vizcaya.

In this sense, the Port of Bilbao has also undergone a huge increase, especially since the inauguration of the Guggenheim Museum in 1997.

This year is a very positive one in the development of cruise-ship revivals in the Port of Bilbao. We will end the year with a balance of 40 ships received and a capacity for 45,000 passengers, compared to the 21 ships which arrived in 2007, carrying 22,973 people.

The development of cruise-ship tourism entails trying to convert

China has emerged as the most competitive market on the worldwide stage. Despite globalisation, I think we are very “Chinadependent”, especially in this part of Europe, and, in my opinion, that is now an unstoppable tendency which may even become more pronounced in the future.

We should not forget that, as regards the global economy, it is just “coastal” China that is active at the moment, but there's still the rest of the country and the inland areas to take into account. As a result, it's not hard to imagine the development of China will continue apace, taking into account the dimensions of its geography and population.

I would like to think that the Port of Bilbao could become the leading Atlantic port in terms of traffic with China and vice versa, although that is not going to be easy as we are seeing that transport-based economies, in principle, are going against the development of new ports within the same geographical area, as in the case of Europe.

But the economies of scale in transportation are taking us towards ever larger ships, which earn money when they are being used and not when they are in port, and global trade is on the increase. At the same time, there will be ports that have to take on new roles and, in this sense, I think the Port of Bilbao will have an important part to play, as it is truly a port without limits.

At the current time, there are 83

07

Basque companies present in China and, without doubt, that number will also continue to rise.

What role does the Port of Bilbao have to play in supporting these companies?

Basque companies which have set up in China, even though they still maintain their roots in the Basque Country, are already global companies active on a worldwide scale, so they will use the Port of Bilbao as long as this is the best choice for them and, in this sense, we hope to not disappoint them.

Exports with a higher level of technology will continue, with gradually less volume (in terms of tonnage) and greater added-value, and so we have to work to maintain loyalty from this traffic through the Port of Bilbao and that is the strategy we are currently following.

What should the Chinese market know and remember about the potential of the Port of Bilbao?

Above all, that Spain is not just the Mediterranean. From the Port of Bilbao, we serve a market that includes all of the Iberian Peninsula and the south of France. There are no limits in terms of maritime transportation, and we have made all of the necessary investments to enable businesses to set up here via either the regulated warehouses or through major intermediaries, to provide a response to the levels of production that are required today: from zero stock to just-in-time.

José Ángel Corres during commercial mission to China

The Port of Bilbao has a modern container terminal with one major advantage: the vast majority of international ports are not prepared to service the large capacity vessels that are currently being constructed.

Bilbao is ready.

In summary, I would say that the Port of Bilbao is the best partner for your business in the Atlantic, offering a direct route to the heart of Europe.

08

Railway Material

BusinessONE: Euskadi available to develop things that beat them today. Of course there have been improvements, but the basic idea is still the same.

Amurrio's technical department has collaborated in the design of some of the signals used at the highest speeds in the world: up to 350 km./h on a direct track and 220 km./h on a deviated track.

I would also highlight that we are specialists in the manufacture of crossings. These are parts which require lots of precision and skill in moulding and mechanisation, and these are areas in which Amurrio has acquired lots of experience.

Mr Jesus Maria de Lapatza Urbiola Chairman Amurrio Ferrocarril y Equipos www.amufer.es

A

murrio Ferrocarril y Equipos (Amurrio Railways and Equipment) is an international leader in the design, production, and installation of railway materials. Their equipment, interchanges, and crossings are in place on high-speed tracks, metro and tram systems, and conventional railways across Europe, Asia, Africa and the Americas.

economically, the company survived and today is one of the global leaders in the railway world, a sector of activity that is really on the up.

Today, railways are considered to be a high-technology sector and one that is developing fast. We have taken part in the construction of the high-speed Spanish railways that are currently being laid, for speeds of up to 350 km/h, and we export

Our experience and understanding of the special characteristics of carbon steel enable us to undertake the moulding and mechanisation of very complex and technically difficult parts, such as casings for electric motors, chocks, and patterns.

Manganese steel is also useful for the manufacture of parts that need to be highly resistant to wear, tensions, and stress fractures in the material, and Amurrio can mould and mechanise parts in any kind of steel alloy according to the specifications of our clients.

How have the company's export activities developed?

We began exporting worldwide around a decade ago. We did export previously, but to a limited number of destinations, and now our exports go to more than 70 countries around

our strategy is based on integration with what is already there in the different countries where we have a presence. This is because we believe you can make much more out of the foundations there and, above all, because it is always the best way for mutual benefit.

We have been watching China very closely for some time now, but are also aware of our own limitations and don't want to try and take on too much at one time. We now have two internationalisation processes underway and, once they are finished, we will continue to take new steps, but, naturally, in the medium and long term China is one of our main priorities.

Asia has always been an important market for us, especially China and India. In India, we are already present through another company.

Perhaps for reasons of language and culture, it has been easier for us to set up in India than in China, but our desire is to reach a partnership agreement with a Chinese company because it is a market where we can offer technology and know-how, and it has extraordinary development potential.

For example, at present, I believe there are 12,000 kilometres of high-speed routes planned there.

Through our partners, we have a relationship with a company in China – by means of a shared technology-transfer and manufacturing agreement – and are supplying them with cast and mechanised products.

How and when did the company's story begin?

our products to more than 70 countries, including China.

The company has a long history; we are the oldest railway material manufacturers in Spain. It began its activities in Bilbao in 1880, making mobile railway materials and various mechanical constructions, as well as the materials for rails.

In the area where most of our activity takes place, on one hand there are new installations – new railway lines which are normally more interesting products because of their volume – and, on the other hand, there is the maintenance of existing lines belonging to different rail companies, which are smaller quantities but in constant demand, and so we are active in both of those sectors.

In 1920, it was becoming impossible to transport materials away from the company, as it was located in what is now the centre of Bilbao, so Amurrio moved premises that year, maintaining the same production lines and adding a foundry.

Today, the foundry and capital assets divisions of Amurrio are recognised in the national market as specialists in the casting and mechanising of parts, such as chocks or carbon-steel casings, that require a combination of experience and know-how.

The main reason for our move from Bilbao to Amurrio was that the company needed space to expand and be in an area that was close to a railway connection, so that products could be directly transported by rail.

Ever since its beginnings, the company has gone through periods of growth and also difficult periods, including the Spanish civil war and other subsequent crisis situations, and even the abandonment of the railways at one point in time when, because of competition from road-based and air transportation, it was held to be an obsolete form of transport.

Nevertheless, given our size, the way we work, and our focus on sectors which could be of interest

We have the satisfaction of holding the world rail speed record, with a machine of ours that reached 574.5 km/h in France.

What are the main reasons for the company's success?

We are a small company; at this point in time, we have 180 employees and our turnover is about 45 million euros, but this gives us a very important competitive advantage because of our agility and flexibility. This enables us to adapt to the needs of our clients and deliver assembled equipment, or even integrated equipment, for industries as diverse as glassmaking, cement, powder and coal sectors, or even steel-making.

Let me also note our very high levels of quality and our ongoing investments in R&D to ensure we stay up to date with the best options available and, above all, our longstanding tradition of doing great work.

You have to remember that there are materials that were patented back in 1910 which are still the most appropriate to use at the present time. No-one has been

the world. Ten years ago, we entered into an partnership agreement with a firm called Vossloh, which is the world leader in this market and consumes a large part of these materials for their production and also for exports.

This association has enabled us to really open up to the world, to develop a product that we had manufactured in the past but had stopped making, which is manganese steel crossings, and to transform our foundry into a specialised unit for this kind of product.

In Euskadi, generally speaking, we have always been specialised in those products where we have been most competitive, and have ceased the manufacture of those which could be produced in areas where labour costs are lower and where they can compete more easily.

For a while now we have been supplying products to the metro system in Hong Kong and have already provided more than 200 devices. We have already also supplied some 150 devices for China's high-speed network, which is a very small amount compared to all that they need, but they are basically samples for the manufacturers there.

We have visited their foundries, which are enormous, maybe 10 or 20 times the size of our company,

and they really impressed us with their working methods, their discipline, order, and organisational capacity.

On the other hand, it is still a little hard for us to adapt to some aspects of their mentality, because sometimes the cultural differences can be a little complex, but there are two things in our respective mentalities that I believe are very similar: honour, and giving your word and fulfilling it, which is worth just as much or even more than a written contract to us.

The definition of a Basque businessperson, generally speaking, is a serious, reliable person who does a good job. That is what has enabled us to reach the highest levels of credibility and competitiveness on a global scale and to have long-term, stable contracts in place in the countries where we work.

We were very impressed that the Chinese are able to create things in such a short period of time and, in short, they really are models to follow in many ways for us. Therefore, I do believe there is great potential for collaboration with them and I think we will be able to undertake some very interesting and complementary projects together.

In this sense, they also acquire know-how in a remarkably rapid fashion and, in some ways, that could start to be a bit of a worry for us, being a small company in a small country, so we have to locate niches where they cannot operate or, and this would be the best option without a doubt, explore projects together.

So how long do you think it will take for you to be present in China, in the same way you are in India?

I'm simply incapable of making forecasts about China. I just don't know. We've wanted to be active there for ten years and have visited often, but we need to find the right

partner, and it depends a lot on the person, the group, and so on.

Ours is a sector that can be complicated because, although we are a private company, we basically work for state-owned companies, so when we set up we logically need to do so with a licence and with the approval of the government, and that is something it is hard to put a timeframe on.

I am a sincere admirer of China.

Every time I go, I end up amazed at their development, and it is both marvellous and beyond my understanding quite how they do it.

China is imposing in every sense, because of its potential and its population, among whom there are 300 million people who have an income level of more than 20 million.

China's potential is incomparable with any other country on the planet.

What should China know and remember about Amurrio?

We are a solvent company that has cutting-edge technology, a long-term vision of the future and 130 years of history – something which, in itself, is a guarantee than can be projected into development in the future.

At Amurrio, we are seriously committed to making constant improvements in the quality of our products and services. All of our railway products meet the specific regulations that apply to each of our clients, and our long history of working with, producing, and installing our products has provided us with significant added value to offer: we have the knowledge, know-how and experience that, I believe, are the perfect combination for the present day needs of China.

In summary, our ambition is to go further than working in China.

What we really want to do is work with China.

Along the tracks of quality Railway material - Capital goods - Cast Steel

What does China represent today for Amurrio, what what kind of future prospects do you see it having as a market?

Given the size of its railway network, China is already a very interesting market for us, but also, from what we've seen and what we've experienced working there, it also has a very interesting production capacity. As such, China is very attractive to us as a marketplace and also a possible place to work.

We have now been present in many markets around the world for a few years and I believe we've done so successfully. Our philosophy has never been based on a dramatic internationalisation, arriving in new markets and saying that we know better than anyone else, but rather

T.+34945 89 16 00

F.+34 945 89 24 80

C/Maskuribai 10 01470 Amurrio (Spain)

www.amufer.es

info@amufer.es

BusinessONE: Euskadi

Machine-Tool manufacturing

Germany, Italy, the USA, India and China.

You actually began your internationalisation process almost from day one...

Yes, we began making machine tools 55 years ago and have been exporting them for 50, so practically from the beginning.

We have our own sales offices in Germany, France, Italy, India, the United States, England, Brazil, China, and Japan, because our sales and industrial policy has always been to be present in the largest markets to offer the best possible service.

Mr Rafael Barrenechea Managing Director Danobat Group Vice President Mondragon Corporation www.danobatgroup.com

D

anobat Group is the leading machine-tool manufacturer in Spain and one of the top 20 producers in the sector in Europe.

The group's best-known products are dies, turning and milling machines, and hydraulic presses, specially designed for the railway, aeronautics, and wind power sectors.

The group employs a total of 1,328 people, with 186 working in their factories overseas.

Introduction to Danobat Group Danobat Group is a group of specialised companies in the machine-tool sector with a history going back over 55 years.

Our turnover was 290 million euros in 2008, 85% of which was exported to international markets, with Germany, Italy, China and Russia being our main markets. In China, we had a turnover of 32 millions euros.

We established ourselves in China in 1992, with the goal of understanding personally the needs of clients and the market there rather than via external representatives, as well as gaining wider knowledge of the applications in which our machines will be used by clients.

Our machines last for around 20 years, so when we set up in China 17 years ago it was with a long-term vision of offering post-sales service and spare parts to our clients, with our own specialists technicians there.

Since 2007, China has been our third-largest marketplace and this year we will also open an office in Shanghai. In April, we will be attending CIMT – China International Machine Tool Show – in Beijing with a 600 square-meter stand. China is a priority market for us and one to which we are going to dedicate a lot of attention.

What are the foundations of Danobat Group’s success and its principal competitive and differential advantages?

One of the most important keys to our success is based on specialisation, on fully understanding each of the sectors in our activities, which are very demanding of sophisticated products in capital assets, the automotive industry, aeronautics, wind power generation, railways and the petroleum industry.

We are also very competitive in terms of offering advanced technology and complete solutions across

our machine range, because of the quality of our service and the speed with which we supply spare parts, which we do in less than 24 hours.

Our offer includes, equipment, the supply of engineering services, which includes the design of custom solution, the manufacture of turnkey production lines, process improvements and technical assistance services.

The reliability of our machines is also worth pointing out. This has obviously not happened by accident, but requires a constant and significant investment to ensure. We were pioneers in the creation of the Ideko Technology Centre 26 years ago, as part of our ongoing commitment to innovation in our products. This is our own research and development centre, and we have 102 specialists in calculations, software and everything to do with machine-tool reliability, as well as the technical department of our companies.

We have just undertaken a study for our strategy plan for 2009-2012, with projections through to 2016, and we have looked at all of the sectors where we are specialised.

One of the sectors where we are the world leaders is aeronautics and lots of airlines use our machines, including Iberia, Air France, British Airways, American Airlines, Japan Airlines, Lufthansa and Alitalia, because we are specialists in landing gear and turbine blades.

Danobat Group is also the owner of two companies in Germany: Overbeck, which has a great reputation in the manufacture of dies; and Bimatec-Soraluce, which is the leading company in Germany in milling machinery, with many high-level clients such as Miele, Ford, BMW, Michelin, Bombardier, BMW, Homag, Siemens and Linde. Furthermore, 70% of our German clients have more than one of our machines, as is the case with Siemens who have seven of them.

We are also the owners of Newall, a British company that is very active in the aeronautics sector and in automotive retrofitting.

What are the group's main priorities at the moment?

One of our main goals at present is to shift from a product focus to a sector focus. Let me explain: previously, we simply manufactured and sold a product, but now our objective is to become specialists in different sectors on a global scale.

Over the last few years, we have begun to develop a specialisation strategy in different fields, diversifying our business into sectors that very demanding sector that are registering strong growth such as aeronautics, railways, and wind power, and working with the highest level of clients like Rolls Royce, General Electric, Alstom, Siemens, Bombardier and Gamesa.

These are sectors that have a lot of demand, but at the same time are very exacting in terms of quality, performance, and service.

In the wind power sector, we are making machine tools to mechanise the many parts of a wind turbine. A wind turbine has mechanical parts and parts made out of glass-fibre.

The blades, which are made from glass-fibre, have been made manually until now, which is to say that there were groups of people applying layers of resin manually with a brush. Danobat has made a machine which is an innovation worldwide: a machine which can do that same task automatically.

For our clients, our financial situation as a provider is very important because our machines have a working life of around 20 years and, as a result, it is vital that they are sure that they will always be able to count on a maintenance and spare parts service throughout all of that time.

With this concept of sector development, we are going further than simply supplying a machine, which would oblige the client to then go out and find other providers. Danobat offers its services as a sole provider of all the machines that a client may need and also offers the best service, all under one contract and one mandate. We have our own research centre, technicians, salespeople, an assembly and service department, all of which are part of a chain that provides our clients with the most comfortable experience.

In the currently unstable global economic panorama where uncertainty reigns, being part of Mondragon Corporation is yet another major strength for Danobat Group, even though we grew by 15% last years and we have started 2009 with a sizeable portfolio which adds up to 70% of our turnover forecast for the whole year.

In line with this strategy and also with the goal of working exclusively and specifically with the railway sector, we have established an engineering company, Danobat Railway Systems, whose activity is basically the development and sale of automatic equipment and lines for the manufacture and maintenance of train locomotives and wagons.

Finally, I would also highlight the advantages we have with our own sales and technical service networks overseas, in countries like

This new activity has required us, on one hand, to incorporate a sizeable number of qualified people who are able to design and install

I think it is also important that we point out that Danobat Group is part of Mondragon Corporation, which is the eighth largest business group in Spain, which provides us with significant financial security.

09

production lines that have a large engineering component and, on the other hand, to build some new premises in Spain that cover more than 10,000 square metres.

The railway industry today is one of Danobat Group leading business lines. In fact, on October 23 2008, we signed the largest contact ever signed in the Spanish machine tools industry: a contract with a value of more than 50 million euros, with the Russian company T.V.S.Z. which is the leading cargo wagon manufacturer in that country.

This contract, which is a record for the Spanish machine-tools sector, is for the design and supply of a highly technologically advanced line for the manufacture of shaftmounted railway parts.

The line is made up of 24 machines, is computer-controlled at every step and has a partsmanipulation system that is free from human intervention. It also includes the delivery of three robotic cells which include a total of 17 machines and which will be used to manufacture the bogies of trains.

T.V.S.Z. has chosen us after a lengthy analysis of the offers received from various providers, because of our credibility, financial strength, and technological capacity to develop this project.

them with all of the machines that they need.

What should China know and remember about Danobat Group?

I believe this milestone could be repeated in the future with other clients and in other markets and could be especially interesting for China, given the importance of railways in that country.

We are a company that is committed to our markets, and so we set ourselves up in the country in question, with significant financial backing, with our large technical capacity, and we are very focused on the quality and service of our clients.

Any client who needs a specialised provider in wind power, railways, aeronautics, and capital assets will find a specialised and sole provider in Danobat Group, who can provide

China represents a huge market for us, and our establishment there is for the long term. This is our commitment to the Chinese market and what our clients there should

remember: we have been in China for a few years now and are here to stay for many more, in close proximity to our clients.

In addition, we also have a great team of Chinese professionals who are perfectly trained to respond to any need that our clients may have.

Danobat Group Contact:T. Hou Tlf: 010-64673639 Fax: 010-64672119 Email: info@danobat.cn www.danobatgroup.com

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Professional Hand Tools

BusinessONE: Euskadi were the first to use laser technology to mark tools and also the first to really build a brand: all Ega Master tools have a comprehensive lifetime warranty and we are the only manufacturer able to produce any article in our catalogue, complete with the branding of our clients, without a minimum order, ready for immediate delivery, and without any additional costs.

This has been innovation on a worldwide scale and a major advance which has added a lot of value to the relationship with our clients.

Mr Iñaki Garmendia Chairman Mr Aner Garmendia Managing Director EGA MASTER www.egamaster.com

“Innovation at the service of efficiency, performance, convenience, and safety”

How has the company's internationalisation process occurred?

Most people are surprised to learn that 80% of our sales are international, although it's no coincidence, but a strategic decision taken when the company was established.

Instead of starting first with the national market and then going overseas, we decided to do things the other way around, because we believe that international markets

and when those environments are very different and even hostile, then you learn more and faster. The same rule applies to companies.

That's why we learnt how to be competitive on a global scale from the start, so that we would not become complacent and comfortable in the national market, where culture, geography, currency, and language offer more protection.

We also fixed a maximum of 30% of our total sales volume for the national market, because we believe that if we go beyond that figure our position could become unbalanced.

Today, we have subsidiaries in France, Belgium, and Italy, a sales office in Mexico, and we've just opened a company in Brazil.

We are also thinking about opening a sales office in India and have had a subsidiary in China since 2000, which is half production and half sales, so we can work there in both senses.

changes in their marketplace, and details about what innovations other companies or sectors are making which could be interesting for us to help us stay ahead of our competitors.

Lastly, we diversify risk and that can be especially positive when a specific market undergoes a crisis.

For example, the economic situation in Spain right now is very negative, but last year we saw an overall sales increase of 8%, and even in the last four months of 2008, we had the best quarter in the company's history and that was precisely thanks to that diversification.

If you look at the breakdown of our sales for geographical areas, Europe accounts for 50% and the rest is divided between Latin and North America – with approximately 7% each – New Zealand 6%, Asia 4%, Africa 5%, and the Middle East about 16%, because our tools are aimed primarily at petroleum, gas, and construction.

As regards the breakdown of sales by pro line, 50% is tube-related,

Ega Master is an innovative manufacturer of highquality hand tools for professional and industrial use.

Over 80% of its production is exported to more than 140 countries and it makes products for more than 100 different brands, among which are numerous European, American and Japanese manufacturers. ow was Ega Master established?

Ega Master was founded in 1990, in the middle of the global economic crisis, in response to the absence of a response to the needs of a sector that I had observed for more than 12 years, occupying positions of responsibility in the industrial sector.

The know-how I gained in the international hand tool market led me to create Ega Master with the goal of innovating in a mature sector like the hand tools market.

Normally, innovation is understood as something wholly linked to the product, but our idea was to also apply innovation to concepts, to marketing and to human resources.

The first step was to apply horizontal integration from the beginning, something that was a first in the hand tools sector, with the aim of making each area and department self-managed, able to react and provide solutions to clients and suppliers in a flexible and effective manner.

How would you define Ega Master's main competitive and differential advantages, what are the keys to your success?

Our company is based on four basic pillars: innovation, horizontal integration as a means of production, human resources, and internationalisation.

Innovation enables us to differentiate ourselves from the competition, adding value both to the product and the service we offer. Today, we have 140 patents, many of them on a global scale.

Our strategy in the last few years has been focused on extending our product range in such a way that our clients – industrial users – do not have to work with a number of suppliers but with just one, so they are able to keep their administrative and logistics costs to a minimum.

Another of Ega Master's most important assets is our human resources. For us, talent is important, but attitude and training which lead to getting involved and a commitment from our workforce is also vital.

We try to look after human resources in our company, and in this sense have been awarded the Novia Salcedo Prize for the creation of jobs for young people, and the Argilán Prize from the Vitoria city council for the promotion of sexual equality in the company.

In fact, we've received a lot of recognition, among which it's also worth highlighting the award of the Prince of Asturias Prize for Business Excellence, for being the most competitive small and medium-sized company in Spain.

At present, 86% of the global financial resources of the developed nations are in the hands of China and the Middle East. The Chinese are very entrepreneurial and hard-working, so there's no doubt that China will become the world's leading economic power in a very short period of time.

China, therefore, is not just a very interesting nation, but also a massively important market for any company that wishes to improve its production in a more competitive way.

As a market it is fabulous, the figures are enormous and, of course, any company that is not already in China today cannot call itself a global company.

Ega Master was the first European manufacturer to produce a catalogue in Chinese 12 years ago and our managing director, soon after joining the company, decided to go to China to learn the language because he understood the importance of knowing how to correctly interpret their language, given that communication is the basis of all business.

In China we have to follow two complementary paths: strengthen our distribution network there and, at the same time, shift certain productive processes to China as they start to become less competitive in Europe, such as those required by a component which needs more intensive labour, for example. China and Europe both benefit from these two parallel tendencies and, in the end, the whole world wins because the value of the sum of the two, thanks to the synergies they generate, is greater than that which either of them could ever achieve alone.

What are Ega Master's leading products?

We make more than 100,000 products for uses as varied as mechanics, electricity, electronics, carpentry, or construction, divided basically into six product lines: hand tools, tube tools, anti-spark tools, 1,000 Watt tools, anti-magnetic titanium tools, and intrinsic safety tools.

Titanium spanners, for example, are the most expensive tools in the world. Their primary property is that they are anti-magnetic, and so are used mostly in hospitals and in the most advanced engineering companies in the world, such as Siemens, Philips, or General Electric. At present, we are the only manufacturers of titanium tools in Europe.

Some of Ega Master’s most successful hand tools

Therefore, for Ega Master, China is not an adversary but an extraordinary opportunity in every sense and we believe that, with the next two years, we will have to have a physical presence and our own subsidiary in China.

What should China know – and keep in mind – both about Euskadi and specifically about Ega Master?

We can bring technology and know-how to China, both in terms of the productive process as well as in business models which can transform opportunities into successes on a global scale.

We are also the leading experts globally in the manufacture of anti-spark tools in different alloys, and do not only sell the product, but also serve as consultants and advisors to help our clients when it comes to choosing the most appropriate alloy for their needs.

We have contacts all around the world at Ega Master, even in geographical areas where the Chinese might find it difficult to develop their business strategies due to differences of culture or mentality, such as Latin America or the Maghreb area, where we have lots of experience, contacts, and cultural links.

In the Exhibition of the Fine Arts Circle, our Alava spanner was chosen as one of the 20 most innovative designs in the world, together with Ferran Adrià's “pegspoon.”

We use the best technology in all of our manufacturing processes. We

What does China represent as a market for Ega Master?

For us, China basically offers two opportunities: that offered by a market in constant expansion with a tremendous size and potential, and the chance to integrate China into our global value chain.

We are firmly committed to quality, not only in terms of products but also our management. We have obtained ISO 9001, ISO 14001, and also “Silver Q” certification for management quality within the European total quality model.

The Alava spanner is the result of applying innovation to a classic, traditional tool like the adjustable spanner, transforming it into a much more modern, useful, adaptable and efficient tool, and making it completely adjustable to work both on tubes and on polygonal surfaces. It has a flexible axle that enables easier adjustment of the mobile head and reduced weight to make it as light as possible. We also gave it an ergonomic shaft and swapped the traditional chrome finish for one we call citacrom, which we developed ourselves, and which is more rust-resistant and doesn't flake if it suffers a blow.

and, through our distributors, sell to the armed forces of the United Kingdom, Belgium, Portugal, the United States, Holland y Turkey.

We also have the United Nations as a client, as well as numerous companies working in the aviation, engineering, chemical, and automotive fields.

Front building of Ega Master Head Office

are not simply markets in which you have to sell, but are a source of continual improvement and learning. To compete with other companies in their own countries, you really have to show you are better than they are. Not just as good as they are, but better than them.

That forces you to constantly improve, to be in the lead. Exporting is how the adaptation and evolution mechanisms of a company are activated, just as occurs with people: people grow when they are exposed to different environments,

We are the leading Spanish company in terms of the number of countries to which we export, including some as exotic or curious as Brunei, Tahiti, Mauritius, or Sri Lanka. We sell 70% of our production under our own brands and the remaining 30% under clients' brands, including most of our main competitors both in the Americas and in Europe.

whether that be copper or iron tubing; 30% comes from mechanic tools; a nd 10% are safety tools.

These three product lines make up 90% of our sales, and the remainder is a complement of the comprehensive service we provide for our clients' needs.

On the other hand, the fact that we are present in 145 countries enables us to get information in real time from our representatives and distributors about what the competition is up to, the main needs and

We have many petroleum and gas companies, such as Exxon Mobil, PEMEX, Shell, Repsol, or Petro Vietnam, as well as mining companies, and armed forces, as we have NATO homologation as a supplier

Who are your main clients?

If it is difficult for the Chinese to do business in those nations, thanks to Chinese-European alliances, and more specifically Chinese-Basque ones, these are markets we can develop together.

And, above all, for Ega Master the specialisation that has become the most important over the last few years is product safety. Western nations are very sensitive about safety, and perhaps that concept is not so well-founded in China yet, but we believe that as the importance of safety begins to grow in China, the possibilities for us there will be enormous.

BusinessONE: Euskadi

Paper/Board Converting Industry

11

China is currently our main market and the one that has changed the most over the last few years. We are firm believers in China, because things are going to get better and better and, in fact, not just in China but in Asia as a bloc, as it is a market that has lots of potential and possibilities for Pasaban.

Mr Gustavo Lascurain Managing Director

Mr Julian Echeverría Sales Director GRUPO PASABAN www.pasaban.com

ounded in 1928, Grupo Pasaban is specialised in the manufacture of machinery for the paper and cardboard industries.

Pasaban benefits from experience and expertise acquired over more than 80 years of history and, thanks to the latest technology in machinery, electronics, and software, provides systems and machinery which add significant value to paper and cardboard during the transformation process.

How did Grupo Pasaban begin working in China?

Pasaban's first steps in China came about through a Finnish company.

We installed the first machine in China before 1990, near to Guangzhou, in an indirect manner, as we were subcontracted by the Finnish company and our machine was part of their package for a paper machine.

Then, in 1992, we went to Beijing together with other Spanish companies for Expotecnia, which was organised by the ICEX, and, from that time on, we began to work very seriously in China.

We made our first contacts with the Chenming paper company in the province of Shandong, and step by step began to introduce ourselves into the Chinese market. At that time, the Chinese Government was very interested in attracting companies that could bring advanced technology with them, and they offered us the chance to set up there through a joint venture. But that was not possible, because the Chinese companies with whom, in theory, we could have reached an agreement began to disappear. So we decided to set ourselves up in China anyway, but on our own.

We opened our own office in Beijing 14 years ago now, in 1994, and hired Chinese personnel with whom we had previously worked, albeit indirectly.

That was a very important milestone for us, because our Chinese clients began to see us at a local level and we had a much more constant and direct contact with them. This significantly improved our image and credibility, at the same time as enabling us to introduce and develop all of our technology there.

During those years, China needed cutting-edge technology and that is what we introduced to the market.

They didn't need so much in terms of logistics and the automation of machinery, but more in terms of quality: being able to perfectly cut paper and cardboard in sheets – without dust – as well as the precision of formats, which our machines that cut to ½ millimetre tolerances could do.

Unlike other foreign companies that only used technology in China that had become obsolete in their own installations, we applied all of our latest technology as soon as we arrived in the country.

We came into contact with all of the big Chinese manufacturers in the

paper and cardboard industries, the market began to develop and, last year, we reached an agreement with the Chinese Central Bank to cut the yuan, the first line of which is just about to start production.

The Central Bank of China has chosen us to be its supplier not because of price or cost, but because Chinese industry really knows what it wants, knows who are the best they can find around the world, and wants access to the best technology. Also, we have 81 years of experience behind us and that means we have a great amount of knowledge, both about the product and the sector. We have a lot of know-how which has been gained throughout the years and that has enabled us to really understand the needs of the market.

We also use our own electronics, which have been completely developed by Pasaban, and so we provide an integrated system from a mechanical and electronic point of view. Obviously, the risk that arises from applying the latest technology in China is the problem of copying, which is a concern that all exporters there have to face. We made it very clear, however, that if China wants to count on complete confidence from its overseas suppliers, then it has to put into place the means to ensure we are respected, because if a company is able to offer the best of its technology, it is only because it has invested a huge amount of time and money to develop it.

The positive part of this is that the risk that you may be copied forces you to continually improve as a company and always keep a step or two ahead. This has always been an intrinsic element of Pasaban's business philosophy: to ensure we remain ahead of our competition, whether they be from Europe or from Asia.

In Europe, our main competitor is Germany, but we offer added value compared to German machinery, both in terms of flexibility and in the speed of innovation, and above all in electronics, which naturally moves at a faster rate than mechanical elements.

Our electronic systems offer a guarantee of quality and reliability to the product, and that is why today we are the leading suppliers of paper and cardboard cutters in China. We currently have nearly 70 cutting lines in operation in China, and none of our competitors around the world have as many machines as that.

It was brave of you to set up in China in 1992, when there were not that many companies looking at the Asian giant at that time.

From the start at Pasaban, we have always worked on a global scale because of our product and our markets. For us, Spain represents 10% of our total turnover and has been at this level for the last 20 years, but China, in comparison, has grown to account for nearly 40% of our total billing after just 14 years of presence there.

In terms of volume and turnover,

China has changed the economic centre of gravity of the whole world and we are very pleased to have gone there in 1992. I also want to point out that we felt very supported by the Chinese authorities throughout the process, especially by the Ministry of Industry, which made setting up there as easy as possible.

Our achievements in China are the result of the work we have done over the last 25 years, with a presence in the United States, France, Finland, the United Kingdom, Sweden, and so on.

What would you describe as Pasaban's main competitive advantages?

Our primary objective is always focused on providing the highest levels of quality and flexibility that are in demand today with the best solutions for our industry and our clients.

Today, Pasaban is a highly developed industrial group that uses all of its experience and know-how, acquired over the course of more than 80 years of history, together with the latest technology in machinery, electronics, and software, to provide systems and machinery which add significant value to paper and cardboard during the transformation process.

We have a very sophisticated engineering department and an extraordinarily well-prepared technical team, both for design, installation, and maintenance, and always work to the highest standards of quality, efficiency and cost-effectiveness.

We also believe that, as part of our package, the international vision and presence we have developed since we began is also very important. The success of our market penetration around the world, thanks to a wide-ranging sales network and our own offices in the US and in China, has made us leaders in the sector, a position we maintain thanks to direct and personalised contact with our clients all over the world, offering optimum levels of innovation and constant evolution.

I would also highlight our specialisation. China is currently based on huge production volumes, but China will not be free from the global movement that gradually leads to specialisation.

China still functions on producing in bulk, but, as the country continues to develop and a more demanding middle class emerges, they will begin to demand more sophisticated, differentiated products, and so volumes are going to reduce.

That will imply greater changes in machinery in shorter periods of time, as all those automated movements for efficiency and sophistication to which we are accustomed in Europe arrive in China, demanding in turn greater flexibility in machinery, because specialisation will increase in terms of format and quality.

In fact, one of the differential elements in our order for the Central Bank of China, and which is a radical change in comparison with other orders we have there, is precisely the level of automation in all the processes which, until now, have been done manually. With this machinery, what we are providing is much greater efficiency and, without doubt, that will prove to be the general tendency in China in the future.

Our idea is to be aware of all of the changes that China may experience, even social ones, so that we know exactly what the country will demand and need at any given time.

As a result, our office in Beijing employs Chinese people who are always up to date with what the market needs.

Furthermore, we offer service. Our

machines last for up to 30 years and, during that time, they need servicing and maintenance.

As China begins to see the need for efficiency in production, they are inevitably going to also see the need to maintain machinery. And, as that is already becoming apparent, we are ready to cover those needs as they develop, so we have Chinese technicians trained for our machines, people who are ready to answer that demand.

China has witnessed a real boom in the purchase of new machinery.

They will now see that machinery has to be looked after and that is an area that we will continue to serve, supplying spare parts, especially taking into account that China is beginning to limit, to a degree, the investments it has made over the last few years.

What are Pasaban's plans for the future, as regards the Chinese market?

We have a firm commitment to remain in China for the long term.

We are currently expanding our offices there to increase storage capacity. Our desire is to be present in China, both in the medium and long term.

China is a very important strategic market for us and, in China, we have an advantage that we have had Chinese employees for 14 years.

We see China from a global point of view, not just strategically and commercially. China is a nation we want to see advance, provide new products for the market, and there will be significant growth in our product range there.

Our goal is not only to continue to grow in China, but with China, because it is the leader in Asia and soon will become the leading economic power worldwide.

What should China know about and bear in mind about the Basque Country, and Pasaban above all?

That there is nowhere else in the world with such a dense industrial fabric in such a small space as you can find in the Basque Country, and that we have always stood out for quality of service and our ability to respond to demand.

We have cutting-edge industries and an important industrial culture and fabric, and I'm referring to companies like Pasaban that represent numerous generations

who have been doing things well for many years. I would also highlight the decidedly industrial education our people receive, and that they are especially well-qualified in the fields of engineering and economics.

There is also a common characteristic in the personality of Basque businesspeople, which is curiosity and the desire to learn. We are never complacent about what we have achieved, but are always looking for ways to improve.

We never consider a product or a process to be definitive at Pasaban, and every one of our employees feels the company belongs to them.

So their commitment, effort, and implication also pays off in productivity.

The culture of doing something quickly to make money fast and then disappear has never been part of the Basque Country. Here the opposite is true. The success of Basque companies worldwide, and of Pasaban in particular, is based on our experience, know-how, and a profound understanding of industry and products that have enabled us to reach a high level of specialisation and the position of world leaders.

YOUR PARTNER IN CONVERTING

PASABAN, S.A. Beijing Representative Office Room 1505 - Building 6 No.6A Shuguangxili, Chaoyang district Beijing 100028 - CHINA Phone : +86 10 5867 8560 Fax : +86 10 5867 8561 E-mail :psban-bj@ysmail.sw.com.cn Auto-txikia, 17 20400 Tolosa (Gipuzkoa) Spain www.pasaban.com

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12

BusinessONE: Euskadi

Provincial Authority of Guipúzcoa

La Concha Bay, San Sebastián

Palace of the Provincial Authority of Guipúzcoa

ties. As part of our potential as a logistics hub, we want to make the most of our unique geographic location as a link between Spain and France, an important advantage from the point of view of logistics and mobility. And, of course, promote the activities and internationalisation of our machine-tool manufacturing companies, a sector which is in constant development and where lots of innovation is taking place.

Mr Markel Olano Arrese President PROVINCIAL AUTHORITY OF GUIPUZCOA www.gipuzkoa.net

I

ntroduction to and description of the competitive advantages of Guipuzcoa:

Guipuzcoa, unlike other Spanish or European regions, has a very significant element of regional balance, based on a very well-developed structure of communities. For example, Mondragon Corporation, which is the eighth largest business group in Spain, is the best example of the dynamism of a community which is quite different from the traditional model and the model of San Sebastian, the capital of Guipuzcoa.

The same phenomenon occurs with a number of Guipuzcoan communities, because our entire region is well organised in terms of communications and mobility infrastructure, so the activities undertaken by the business community are not solely concentrated on a single nerve centre, but are spread out over all of the region.

Guipuzcoa also has quite a balanced population, given that the Guipuzcoan character includes a very entrepreneurial element which has always developed business activities that, over time, have expanded throughout the world.

The Basque character, in general, and Guipuzcoans, in particular, have a long industrial tradition. In fact, some industrial traditions related to iron and metalworking go back as far as the middle ages and, over the course of time, have been transformed and modernised until they have produced some very innovative companies today.

Furthermore, we also have extraordinary human assets with highly educated people who enable us to offer a very competitive social background.

Which are the strongest economic sectors in the Guipuzcoan economy?

In terms of numbers, the most important sector in our economy is the machine-tool industry, because more than 50% of all of the machine-tool production in the whole of the Spanish state comes from the Basque Country and, within the Basque Country, the majority comes from Guipuzcoa.

Taking into account that we are

talking about a territory that is home to just 700,000 people, it is obvious that the size of this sector is very significant.

The sector related to rail transportation and everything that has to do with mobility is also very important thanks to, for example, leading companies such as Irizar or Ulma which have a number of very diversified business units and are recognised on an international level, and even in China.

In summary, we are talking about Guipuzcoan companies with business structures that constantly invest in innovation and which are always launching new projects in different areas. The diversification of Guipuzcoan companies is one of our major strengths and adds an important capacity to our economy.

The capital, San Sebastian, also has a number of very important technological centres and a very significant university tradition.

What are the Provincial Authority's priorities today?

One of the strategic initiatives we are undertaking is to establish a permanent collaboration with the private sector. In fact, we have created a group, called “Guipúzcoa Adelante” (Guipuzcoa Forward), that has the promotion of publicprivate collaboration as its primary mission in order to generate new projects and activities in four sectors of industrial development which we have selected: renewable energies; the bio-sanitory sector; Guipuzcoa's potential to become a logistics hub; and, of course, the machine-tool sector which, as we already mentioned, is one of the foundations on which our economic strength is based.

The participants in “Guipúzcoa Adelante” are the Provincial Authority of Guipuzcoa; Mondragon Corporation; Caja Kutxa – the leading Guipuzcoan financial institution; the Chamber of Commerce; and ADEGI – the Association of Guipuzcoan Businesspeople; which is to say, all the major public and business institutions in the region. We all talk about things and put work groups into place to come up with new projects. In the bio-sanitary sector, for instance, the Miramon Technological Park has a lot of possibili-

Guipuzcoa has a very important element of social diversity, it is a very open region, and we firmly believe it is vital that we build a political and social climate of agreement and consensus to deal with the challenges our region has to face with greater strength and in the most effective manner.

In this administration, we have aimed to promote this climate and put in place the necessary means to do so, both in relation to the economic situation as well as for large projects that we wish to undertake, such as bringing into service a major port in Pasajes.

This is an extraordinary project which will have a positive effect on the competitiveness of our infrastructures and in the regeneration of the Bay of Pasajes, which is pretty run down at present.

2009 will be a historic year for public investments in infrastructure, essentially in roads and highways and especially in what we call the “Guipuzcoa ringroad.” This is a series of high-capacity routes that will help link up both the region itself and connect us to other areas and, of course, the high-speed train project, where work is already underway and which will soon connect us with the rest of the Spanish state and the heart of Europe.

This renovated infrastructure network will prove to be a very valuable asset in terms of the development of business projects for our companies, as well as a means to attract new investments.

Let's now talk about the possibilities that Guipuzcoa offers from the point of view of tourism.

Guipuzcoa's tourism offer is essentially focused around three basic poles. The first of these is the obvious attraction of the capital, San Sebastian, and the whole Guipuzcoan coast with its beautiful fishing villages and coastal towns.

Hondarribia and Zarautz, for example have undergone massive development from the tourism point of view and are very significant attractions for visitors.

We also have incredibly beautiful inland areas, with various natural parks which we are also promoting at the Provincial Authority, and the third important element is our culture and cuisine.

Culture and gastronomy are very closely linked here: you really cannot appreciate the scenery of Guipuzcoa's mountains and hills without understanding the age-old pastoral practices of our region.

People visiting Guipuzcoa will enjoy our stunning natural environ-

ment and some truly beautiful scenery, and will also come into contact with a centuries-old culture, intertwined with a very rich and globally recognised cuisine.

At present, there is no other region in the world with as many Michelin stars per square mile or per resident as there is in Guipuzcoa. Our specialities from a gastronomic point of view are very well know,n and we have a number of chefs whose fame and prestige is recognised around the world.

Returning to San Sebastian, which is the flagship of the Guipuzcoan region in terms of tourist attractions, apart from its obvious beauty there is also the quality if its cuisine, which can be appreciated by a visit to the centre to follow the route of the “pinchos” (local bite-sized delicacies), which is a truly amazing experience for many visitors. San Sebastian also has a very rich cultural scene, including the International Film Festival, which is well-known internationally.

Let's now talk about the spectacular explosion of China and the interest that it has provoked

among Basque companies and, especially, those from Guipuzcoa.

Guipuzcoan companies have been extremely quick when it came to appreciating the importance of the Chinese market, and have put into place a dynamic of being present and progressively establishing themselves in China, which shows that Guipuzcoan industry is taking China's potential very seriously.

Both the Basque Government and the Provincial Authority of Guipuzcoa have provided economic backing specifically to those Guipuzcoan companies who are undergoing the internationalisation process, supporting them with special programmes and even with competitions and prizes awarded to the companies who have adapted best to the internationalisation process and, in fact, a large number of these are present in China today.

The attitude of Guipuzcoan companies when it comes to entering the Chinese market is that the effort and achievement has to be shared with Chinese companies. That is to say that they are not only working to develop their companies in China, but that they are also gener-

ating wealth and playing an active role in the development of Chinese companies themselves. An example of this can been seen in the machine-tool sector, where our companies are not only selling products to China, but are also promoting and putting in place industries there, with a vision and goals of remaining there for the long term.

In summary, we don't have a tradition of getting rich quick or speculating in Guipuzcoa, but rather a mentality based on the work ethic, on the strength of business relationships, and on win-win situations which can only come from the credibility, seriousness and confidence of our businesspeople, who have a long industrial tradition and history behind them.

That is the best guarantee our land has to offer, we are a region with a very competitive business environment whose most fundamental value is working hard every day and being people whose word you can always rely on.

BusinessONE: Euskadi

Leisure, Gaming & Gastronomy

H

Grupo Nervion is active in the gaming, leisure, and entertainment sectors, and we are a group of businesspeople and investors who gambled on building a business. I am the face of that business – and also of a group of companies in other sectors – and hold the positions and responsibilities of Chairman and Managing Director.

Grupo Nervion was established in Bilbao, Vizcaya, in 1994, thanks to an idea my late father, Miguel Ortiz-Cañavate Puig-Mauri, had – he was a prestigious Madrid lawyer who was always on the lookout for opportunities, was very optimistic, very human, and had lots of interests. He promoted and developed the idea that the city of Bilbao could have a casino.

Even though he was born in Madrid, my father lived for, and enjoyed, some of his childhood in the Basque Country. He grew up in the Bidania hills, in Guipuzcoa, spent lots of time there, and had an enormous love of Euskadi.

I have lived in Japan since 1985.

I've always had business interests in Spain, but my base and family are there, as it was where I began in business. When the public tender was launched in 1994, my father called me because I had business interests in Japan, the USA, and businesses taking off around the world, and could bring high-level foreign businesspeople to invest in Euskadi. It is a welcoming place, a place where you feel right at home but, in those particularly violent years, one where there was almost no significant foreign investment.

So, I invited well-known businesspeople from Japan, Denmark, and France, all of whom were important people with numerous successes of their own, and who, together with investors from the Basque Country and other areas of Spain, formed the basis of our business.

We were up against two other proposals in the tender, and we won the approval of the Basque Government whochose ours as the best option for Vizcaya when they made their decision.

And that was how we began. The license was awarded in February 1995 and we opened the Casino in Bilbao a year later with all its

services: an exhibition restaurant, bars, etc.

between us that lets them accompany me in all the new ideas and projects I launch, and we are all in agreement that what we wanted to do was contribute to the development of Bilbao in a very active way. Back in 1994, they all said that Bilbao was a very pretty place when, in truth, it really wasn't all that pretty but had lots of potential.

We wanted to give this city an international air and open it up to the world we came from, to contribute to its spectacular transformation into a city that has become a reference worldwide and is studied on an international level.

As businesspeople, we have interests all around the world, and always choose locations that are not only interesting from a business point of view, but also have plenty of leisure possibilities. It is vital that the places we choose can offer something positive on a personal level, in terms of experiences.

And I believe we've done it. In fact, all of our investments worldwide are made from here, they originate in Euskadi. That commitment is going to grow further once we change the location of Bilbao's casino in 2010, because we already have the licence and want to do something much larger with a much greater offer of services.

We are going to move the Casino in Bilbao to a new location in 2010, making it part of a very large complex with an area of 4,300 square metres which will also feature a hotel in the same building.

This is a major investment in terms of a service offering and a contribution to the development of the Bilbao area.

Miguel Ortiz-Cañavate Chairman & Managing Director GRUPO NERVIÓN www.casinonervion.es www.hipodromoa.com www.casinokursaal.com

ow and when was Grupo Nervion established, and what are the group's main areas of activity today?

meters of casino floor and five spaces for all kinds of events, from the organisation of the Spanish Poker Championships to concerts by acts like Gloria Gaynor or Kool and the Gang. The rooms can hold up to 1,700 people for dinner, a little like Las Vegas. We generate high-spending tourism in all of Spain. Our establishments play an important role in the factors tourists and businesspeople look at when they are planning a trip to a specific city or area: that there is a good leisure offering, with space for events, good restaurants and so on.

space,

Sadly, my father died a few days before the grand opening and, almost a year after we opened, I took on the responsibility for the whole project, my life changed, and I became totally involved in the casino and gaming world.

At that time, we were relatively new in the sector and did not have that much experience, even though, among our investors, we had a major French investor with worldwide interests who already had over 20 casinos in France. That, and the fact we hired the best professionals and applied the best of our international business experience, brought innovative ideas to play and some fresh air to the sector that produced a revolution in the casino world at the time. We were the first to offer poker games in the whole of Spain, the first to advertise on television, organise exhibitions of original work by great artists like Miro, bring cutting-edge theatre companies like Butoh, and were the first to start a school for croupiers and casino workers which is a reference in the sector today, among other innovations.

Furthermore, we were closely supported by the Basque Government – because casinos come under the auspices of the administration which ensures there are controls in place to avoid “anything goes” practices that could result in undesirable consequences for clients. When we felt comfortable here and ready to grow, we purchased the Kursaal Casino in San Sebastian and the Casino in Mallorca. Later, also in Euskadi, we got into the horse-racing world and won the tender to manage and operate the Lasarte racetrack in San Sebastian, of which I'm also Chairman, and to operate betting on horses in the Basque regions. We also won a license for a casino outside of Spain, in Chile, and last year we bought the Casino in Ceuta. So, at present, we have five casinos and that is the group's basic structure in gaming and leisure.

We are always on the lookout for new investment potential and business opportunities, and want to grow in the entertainment and gaming sectors, although we are now also active in hospitality and showbusiness.

The Paladium theatre in the Casino of Mallorca, for example, has the largest stage in Europe right now.

The Mallorca complex is huge, with more than 16,000 square

There is one detail I'd like to highlight; when we opened the Bilbao Casino, Basque people said we were like a Chinese Casino, in the sense that, from the start, we have worked hard to ensure our Chinese clients receive a warm welcome and excellent service. Of course, that kind of exquisite, high-quality service is offered to all of our clients and has won us a fantastic reputation all around Europe.

It is true that, from the beginning, we have had great connections to China because the Chinese are wonderful clients: they are very polite and love to gamble, so they hold lots of important events in our casinos, such as the Chinese New Year, which is held every year in the casinos in Bilbao and Mallorca ever since we took them on.

We also ensure that tour operators know we are there for them, and have made sure we understand every detail of the idiosyncrasies of the Chinese psyche, as well as the diversity of China, so we make them feel at home with us, and we feel at home with them.

A great success then, taking into account China's potential from an economic and a tourism point of view.

Exactly. The Chinese community really values friendly treatment, just as they appreciate good food.

Those are two things it is really easy to find with us, because our Ibaigane restaurant in the casino offers the opportunity to sample one of the most select and interesting menus in Bilbao in unrivalled surroundings, with views over the Arriaga Theatre and the river.

Ibaigane is recognised throughout Vizcaya and has had lots of success because, in all honesty, the cooking, the service, and the place are wonderful.

In addition, the level of spending of our Chinese clients has increased in a spectacular fashion over the last 14 years. I'm talking about Chinese clients who live in Euskadi, businesspeople who now have much more economic wherewithal than before: in the construction business, restaurant owners, and so on who have prospered in this region thanks to their efforts, their dedication, and their hard work.

To what degree has the fact that you live in Japan and and have a global vision helped the business to progress?

It is true to say there is a significant global spirit that characterises my partners and myself, because we are all international businesspeople with companies on every continent. There is a synergy

What competitive and differential advantages would you highlight in Group Nervion's business philosophy?

We learn by thinking, sharing experiences, and imagining the future, and, from that point on, by undertaking projects. We never stop planning, investigating, training our people, and learning through travel. From the start, we were very active, visiting Las Vegas every year and now also Macao, which has become the leading gaming centre in the world.

We have brought many overseas ideas here and are a reference in the casino world for our size, which is now considerable, and are listened to because of that. In fact, when we bought the Kursaal casino it was loss-making, and a year later we had profits and a happy workforce.

The same thing happened with the

casino in Mallorca and the one in Ceuta. I believe we are the company that signs the longest-term and most advantageous work agreements for all concerned, something no other casino company in the world does, and we a have very close relationships with our employees, which helps us work better.

Coming back to China, what is your opinion of its economic potential, now that it has become the world's third largest economy?

I have two companies in China, Beijing Tong World and Beijing Neghora. One is dedicated to the production and organisation of events and the other to sales. In my opinion, China is still just waking up, in the sense that its potential is simply spectacular and it is taking its first steps. They are preparing their technologically and investing lots in research and development, because they want to lead the world in every sector.

China has already grown a lot, but it has a lot more growing to do in my opinion, until it doubtless becomes the world's leading economic power. China is already big today and will be bigger tomorrow.

And it is precisely because of that potential that Euskadi and Spain have to undertake a major branding effort to get their products known there.

The thing about Spain, and a little less so in Euskadi, is that we do not know how to sell ourselves. You don't have to look any farther than the huge and growing trade deficit we have had with China for a number of years now.

Fortunately, there are more and more Spanish companies that have entered China, who have a presence

13

and are very successful there.

Companies like Iberdrola or the BBVA, who are both Basque too, as well as other, smaller businesses who have taken their first steps there, such as the 83 Basque companies who are already present and active in China today.

Considering both your global vision and your emotional attachment to Euskadi, what would you like to share with our readers about what they need to know, and remember, about the Basque Country?

Even though I have Basque origins, I was born and brought up in Madrid and I have also not lived in Spain for half of my life, so I think I have to give my opinion as a foreign investor, even though a very large part of me does feel Basque.

From the experience point of view we talked about before, this is a great place: the people are very friendly, polite, noble and welcoming; security levels are among the best in Europe, which is to say you're safe walking down the street; and the cuisine is simply marvellous. There is one of the highest living standards in the world here, something which is truly to be envied.

There is also another tremendously positive aspect, which is how well trained the human resources are: when we initially hired 165 people to work in the Casino in Bilbao, 78% had university degrees and spoke languages. People here are hard-working, responsible, and very dedicated.

So, I would say come and visit us, and have a great time in the two casinos we have here in Euskadi. www.vivendiproducciones.com

BusinessONE: Euskadi

Development, Competitiveness and Internasionalisation

T

he development, competitiveness, and internationalisation of the machine-tools sector

Established in 1946, AFM – the Spanish Association of Machine-Tool Manufacturers – brings together the potential of the entire industry, with more than 100 member companies that account for about 92% of Spain's total production in the sector. These are, in turn, supported

members, and fuelling growth in the sector. Thanks to a wide range of services, it contributes to strengthening internationalisation among its members and developing an ongoing commitment to technological innovation.

Through its associate companies, AFM provides access to a very diverse and increasingly specialised offer, all with the guarantee of an association with more than 60 years' experience which, since its origins, has brought the most

sector, and contributing to their development.

We are the third-largest producer in the European Union. This is the best evidence of the very high level of confidence that our clients have in Spanish machine tools. That confidence is the value that enables us to play an essential role in the most relevant productive sectors in the economy, such as the automotive sector, aeronautics, aerospace, energy generation, railways, capital assets, mouldings, and patterns, among many others, and we export

31.2%, notably thanks to orders from overseas with a spectacular increase of 39.2%, as compared to those coming from the internal market, which grew by 6.2%.

The main priorities for companies that manufacture machine tools can be divided into four aspects: promoting technological development and innovation to make machines which are increasingly environmentally friendly, more precise, more intelligent, more functional, and more productive; increasing our already sizeable international presence; increasing the level of specialisation; and expanding in size to successfully face up to the challenges mentioned.

The principal markets focused on

by Basque machine-tools companies are Germany, Italy, France, China, Mexico, India, Portugal, the United States, the United Kingdom, and Poland.

At present, China is the world's third-largest producer of machine tools, after Japan and Germany.

Given its size and the growth that China has undergone in the past few years, it still has a massive demand for high-quality technological equipment, which also makes it the world's largest importer. For us, it really is a very important potential market. At the same time, China has become the fourth most important export market for Spanish machine tools.

The BIEMH - Spanish Machine Tool Biennial - will be held in Bilbao from May 31st. to June 5th. 2010

by very dynamic and well-equipped auxiliary industries and a strong network of technology centres, making them a real competitive force.

Koldo Arandia, the Chairman of AFM, explains: “AFM's work is focused on promoting competitiveness, defending the interests of our

important machine-tools manufacturers together.

Spanish machine tools are synonymous with trust, reliability and service. AFM has spent over 60 years dedicating itself to improving competitiveness in the Spanish machine-tools industry, defending the interests of companies in the

60% of our production to international markets.

Spanish production of machine tools in 2007 reached 1,047.5 million euros, representing growth of 7% and a new record for the sector.

New orders grew strongly in 2007 compared to 2006. Specifically by

Spanish machine tools truly are a very competitive product. Due to their enormous flexibility, they can be adapted to the specific needs of any client, sector, and application, and they have unrivalled levels of productivity and returns on investment.

Our position as the third-largest producer in the European Union is the result of commitments that machine-tools companies have made to technological innovation,

Koldo Arandia AFM www.afm.es

support mechanisms for machinetool exports and for companies who want to set up in those countries.

In this sense, there is a qualified workforce that understands the operation and advantages of machines that come from the nation that is behind the institutes and is present in those countries where the machines are located, as well as contributing to the appreciation of the quality, technology, and image in general of the nation that has created and supports this kind of initiative.

THE SPANISH-CHINESE INSTITUTE FOR PROFESSIONAL EDUCATION The Spanish-Chinese Institute for Professional Education in Machine Tools – CSMC – has the support of the Spanish and Chinese governments to undertake the training of personnel so that they may become qualified employees in the Chinese machine-tool industrial sector, including companies in automotion, aeronautics, railways, etc.

CSMC is located in the city of

05

José Antonio Garrido Bilbao Metrópoli-30 www.bm30.es

Since its establishment in 1991, the Bilbao Metropoli-30 association has supported close collaboration between public entities, companies, and organisations in a collaborative model that brings together the best traditions of solid political leadership derived from European partnerships and the kind of intensive public participation that typifies North American cities.

In the last few years, more than 800 experts from the bodies that are members of Bilbao-Metropoli 30 have taken part in an ongoing process of strategic planning about the goals of Bilbao's metropolitan area and the projects necessary to make these goals a success. As part of the process, the association has paid a lot of attention to incorporating the most advanced knowledge about the revitalisation of cities, to ensure that Bilbao becomes a metropolis with international levels of competitiveness and living standards.

The Bilbao-Metropoli 30 association has been used as a model in the

唯一生产以下六种工具的制造商

工业手工工具

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巴斯克首相给我们授予全面质 量管理奖

internalisation, and improvements in organisational management and human resources development. A commitment that has made it possible to export, on average, 60% of our production to international markets.”

PROMOTION AND EQUIPMENT FOR SCHOOLS AND TECHNICAL CENTRES

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费利佩王储给Ega Master公 司授予公司社会责任奖

在145个国家市场的最被 奖励的领先者。 在创新方面的领先者

费利佩王储西班牙最具竞争力 公司奖

Training and education is one of the basic strategies in the constant development of the machine-tools sector. With the aim of promoting this, AFM – the Spanish Association of Machine-Tool Manufacturers – together with the Proschools Consortium and the IMH – the Institute of Machine Tools – has backed initiatives like the SpanishChinese Institute, inaugurated at the end of 2003, and the SpanishMalaysian Institute, which was developed in 2004.

In this kind of international project, as well as the educational, professional and technical aspects, these institutes operate as very efficient

Tianjin. The project was begun in 1998 and has been operating there since 2003.

creation of new strategic development organisations in Europe and Latin American.

BILBAO METROPOLI-30

Looking to the future, impressive advances in the revitalisation process will be a guarantee and stimulus to position Bilbao as a globally competitive metropolis, thanks to its capacity to manage innovation and the dissemination of cultural and technological tendencies.

Bilbao Metropoli-30 is an association whose primary mission is to undertake promotional and study activities which will contribute to the revitalisation of Bilbao's metropolitan area.

Jose Antonio Garrido, its Chairman, explains: “Bilbao Metropoli30 is active in the creation of activities aimed at improving the local and overseas image of Bilbao's metropolitan area, as well as study and research projects directed at furthering our understanding about the metropolitan area of Bilbao and other cities which are models of conurbations that enable us to learn useful lessons.

The association promotes cooperation between the public and private sectors to arrive at shared solutions for problems of mutual interest that affect Bilbao's metropolitan area.

In the next few years, the capacity that cities have to organise and manage their resources in a new environment of international competition will significantly determine their response to the growing demand for quality of life among their residents and visitors.

The defining characteristic of the Bilbao Metropoli-30 association has been the committed support and active participation of public and private-sector members to define and reach their goals, which will make all the difference between Bilbao's metropolitan area and its possible competitors.”

BusinessONE: Euskadi

Luxury Products “Made in Spain” part of their range.

Marques de Riscal has a very diversified export profile, our products are sold from Alaska to Chile in every market, and we are the leaders in many of these.

Alejandro Aznar José Luis Muguiro Aznar Herederos del Marques de Riscal www.marquesderiscal.com

M

arques de Riscal, the historic cradle of modern Rioja wines.

In 1846, Marceliana Hurtado de Amezaga began producing wine in the traditional style, when she inherited half of the Mayorazgo area from the Ruiz de Ubago family. In 1858, her brother inherited the vineyards and old wine cellars and, with his son Camilo, launched what would become the flagship of modern Rioja wines: Marques de Riscal.

How and when did the history of Herederos de Marques de Riscal begin?

A.A. Exactly. The younger Marques de Riscal, Camilo, was a very eccentric person and his father, Guillermo, had lived in Bordeaux since 1836, so he was well aware of what was happening in Bordeaux and how the chateaux worked, as they had already being doing so for more than 150 years. He drank in all of that culture and began to bring it to the Elciego vineyard in the Alavesan Rioja region.

He had established a merchant house in Bordeaux and his son, Camilo, had been educated in England and in France, so both of them where very conscious that exports would be vital for the development of the company, but were also aware how to do so successfully utilising and applying the know-how that that had acquired through the connections they had made in those European nations.

That innate tendency towards export markets is, without doubt, one of Marques de Riscal's most important competitive advantages. What other keys to your success might we identify?

Elciego Winery

A.A. It all began in 1858 for Marques de Riscal. Guillermo Hurtado Amezaga and his son Camilo introduced a very innovative project at the time which involved bringing Bordeaux methodology to the Rioja region, which, until then, had only produced recently harvested young or same year wines which would be drunk soon after they were made.

They imported the Medoc style so that they could produce fine wines, aged over time, and set up Bordeaux-style cellars to do this, with winemakers from Bordeaux supervising the process. They also brought in numerous grape varieties to do some experimentation and see which of them blended best with those from the area.

All of this started in 1858 and, by 1862, the first vintage was bottled.

This is important because in 2008 we celebrated the 150th anniversary of Marques de Riscal, something that is truly special and which few companies ever get to reach.

Another important aspect worth highlighting is that our founders immediately realised the national market was not going to pay for the huge investment effort the project required, so they had to start exporting. That is why Marques de Riscal was always a pioneering company in exports from the very start, because the national market could not cover such large costs, hence the company had to opt for the export route from a very early date.

Our original export markets were the United Kingdom and Latin America, particularly in Mexico and Cuba, so Marques de Riscal has always had exports in its DNA. And that is pretty unique, because having a global vision today is good, but having had that in 1858...

A.A. That same spirit of Marques de Riscal has also characterised other periods in the history of the company. Over 150 years, there have obviously been all kinds of eras, some very dynamic and others less so, but the company's culture is firmly rooted in the balance between tradition and innovation.

J.L.M. I believe that one of the most important milestones in the development of the company has been the changes we've undergone in the last few years, which have given the company a new vision of international markets. Without a doubt, the creation of the Frank Gehry building has been a commercial highpoint, because it has enabled us to significantly consolidate our brand on a global scale.

The union of tradition and modernity is also one of our most important values. The strength of the Marques de Riscal brand in exports is very important, and we are the leaders in many of the markets where we are active.

At present, Asia is one of our most important markets: we were the first into Japan, with Torres, but instead of setting up an office in Tokyo, our sales strategy was aimed at distribution which, in the long term, proved to be positive for us.

Japan was our first Asian market, 25 years ago now. We sold very few bottles there for many years, but today we are the leaders in reserve wines and something very similar has taken place in China.

In China, we have taken small steps but very confident ones, and we went on plenty of exploratory trips, but the most important thing is that we were also the first to market there. The market was very difficult at the time, but we came into contact with China's biggest importer, who now distributes our wines there. They are very dynamic distributors, their president is Canadian by birth but has been in China for over 30 years. They sell the best international wines and now include Marques de Riscal as

We are also very well situated in Europe, although our main priority at the moment is Asia. Our commercial strategy over the last five years has been focused on giving priority to Asian markets.

We are the market leaders in China, where we are present in Beijing, Guangzhou, Macao, and Hong Kong; number one in India; and we are selling well in Singapore, Taiwan, Vietnam, and Cambodia, so you could say we are pretty well placed in Asia.

China is not a sprint, but a marathon. So you must be very satisfied with the race you began a number of years ago?

A.A. That's right. But, as Jose Luis said earlier, it has not been easy. We had to find the right distributor because Marques de Riscal did not have its own distribution in any of those markets, but we decided to find the best distributors in every geographical area. To do so, it is vital that we can count on a strong brand, that is well-regarded by distributors, because that leads us into a good, long-term relationship with them, but you can't expect to always get your distribution right from the beginning.

The efforts you have made over the last few years to promote your brand on a global scale must also have had a lot to do with the success you're enjoying now.

J.L.M. Definitely. It's the only way.

That is why one of the most significant decisions for Marques de Riscal from a commercial point of view has been the brand reinforcement and projection offered by the Gehry building. That has been the most important springboard for us to reach the world and has also provided us with a useful differential element compared to our competition. We have been able to become the most modern Rioja brand, even though we are also the oldest. After 150 years of history, we continue to work to open up external markets, to reinforce the image of our brand, and to keep blending quality and innovation in our wines.

We have also made a great effort to update the presentation of our wines, and that strategic change, as well as the decision to not set up our own distribution operations but to rely on the best external distributors, has turned out to be a real success.

Beijing Olympics, for example, there wasn't a restaurant in China where you couldn't find Marques de Riscal.

Our distribution and growth in sales in China has been truly spectacular over the last few years. Of the 84 markets where we are present around the world, the only one where we have seen sales double this year has been China.

A.A. Being first into a market is essential to ensure growth later on, as this then flows from an understanding of the brand.

China's potential is also impressive from the point of view of the population, in terms of the number of potential consumers...

J.L.M. Without a doubt, although you also have to take into account that China is a very complicated market. The spectacular growth that we have experienced there is based essentially on our distributor and on the quality of our products. China is a country that has surprised us in a very positive way because it is growing much more rapidly than Japan, and the forecasts are very promising. This year, for example, we hope to expand there by over 20% more than last year.

One of the objectives of this report is to promote interesting aspects of Spain in China that have been recognised internationally, such as our cuisine.

What role does Marques de Riscal have to play in this process?

A.A. The global phenomenon which internationally renowned Spanish chefs have started has made our cuisine into a reference around the world and is really helping Spanish food companies, and wine companies in particular.

The appreciation of Spanish cuisine as a force in the world is also contributing greatly to us all working together towards the same goals, and to building that image of Spain that we are all exporting to every global market.

We also believed in the “Madrid Fusión” project from day one and, in fact, are the official sponsors of the gala reception every year.

Today, “Madrid Fusión” has become a real reference in the framework of global gastronomy and we always thought that it was very positive to be connected and

“City of Wine” featured in Wine Spectator, Dec. 15th 2008

work towards the same goals, as it is something that has always been missing in this country, in my opinion.

J.L.M. Last year, for example, the director of “Vinexpo Burdeos” was in Shanghai and told our distributor that what Spain had achieved was something no wine producer from Bordeaux had ever been able to do.

It is true that, as Alejandro says, we have achieved lots in this company, but, until now, we have not been able to come together and show what we have done to the world.

Fortunately, in the case of Marques de Riscal, I think we have perhaps been the exception to that rule, because the image that we have projected around the world with the City of Wine has helped all of the Alavesan Rioja region. In fact, our building was featured on the cover of Wine Spectator, the most prestigious and widely read magazine in the United States, which has never been done before.

In summary, what should we highlight about Marques de Riscal for our 2.7 million readers?

A.A. Now our efforts to achieve that brand image are being carried over to our products. First on our labels, then on the boxes, and in the products in our shop, basically in a complete lifestyle concept that Marques de Riscal has to imbue all of its products with.

The style inspired by the City of Wine that we have created in Elciego, that concept of luxury and prestige that fills our world, already has its own image which is being interpreted in every last detail in each and every one of our products.

This represents a lifestyle that goes much farther than a bottle of wine to become a concept that symbolises a real experience.

J.L.M. The truth is that the development of the project with Gehry was fascinating from day one. We also have a great friendship and I believe that, today, personal relationships are very important in wine distribution, as well as having a very good product and brand, obviously. Our Chinese distributors consider Marques de Riscal as one of their own and, in fact, when they have experienced difficult periods, we have always been there for them.

This year, the magazine Marques de Riscal publishes will be focused on China and India, our distributors will be featured and what we have achieved over the last four years really is impressive. During the

15

www.sensacionesvivas.com

www.marquesderiscal.com

A.A. First of all, the quality of our wine. Our basic commitment has always been producing the best quality products. In the Rioja region, we produce reserve and special reserve red wines, and also rose or blush wines. And, in our Rueda vineyards, we produce young white wines which are aged in wood barrels, like in the Limousin. These are basically our two main product lines, both of which have a fantastic value-for-money ratio. I think it's also worth adding that Marques de Riscal has always been a Spanish brand that is known around the world, precisely because it has been able to conserve the same qualities over the course of its 150-year history, which is the hardest thing to do in the wine world.

J.L.M. I would also like to highlight the close collaboration we have with Paul Pontalier, an enologue who is very well-known in China and who has been essential to bringing a greater global aspect to our brand.

In summary, China is a very important market for us and will continue to be in the future.