There has been an improvement in the majority of the final outcome indicators for the Basque Country, both economic and social. Generally speaking, the region remains in a favourable position, ranking in the first quartile among European regions in both income and poverty rate. Some indicators of inequality and vulnerability – such as ‘median income’, ‘ability to face unexpected financial expenses’ and ‘poverty rate’ – show very positive results. This, combined with strong economic performance, suggests the existence of a balanced model of socioeconomic competitiveness in line with what is referred to as ‘competitiveness in solidarity’.
In the report, we have identified a major challenge related to unemployment, as there is still evidence of the greater impact of the crisis in Spain and the Basque Country, especially among the youngest segment of the population and those over the age of 55. This demands continued efforts to ensure that unemployment among this group does not result in social exclusion, utilising different measures to promote training and education activities for this group, more personalised monitoring of their situation, tax incentives for hiring them, and the continuation of anti-exclusion social policies. In addition, the quality of new employment contracts has not improved significantly along with the recovery from the crisis. In view of this, it is important to continue efforts to foster job quality, not only in terms of pay, but also in aspects such as temporary or part-time work, and promoting career pathways that facilitate professional and personal development, so that all people in work can achieve satisfactory levels of wellbeing and the Basque Country can carry on making improvements in social cohesion indicators.
In comparison with other European regions, the Basque Country is in a good position with regard to business environment indicators thanks to strong institutional quality, policies and strategies implemented, as well as individual training and education levels, among other aspects.
In terms of firm performance, productivity and cost indicators show positive results. When looking at the financial aspect, firms have shown themselves to be riskaverse, they have continued to reduce their debt level and consolidate their equity. In innovation, firms are showing relative strength in technological innovation (primarily process innovation), and weakness in non-technological innovation (organisational and marketing) as well as in the combination of the two types of innovation. In general, it appears that Basque firms are sticking to the status quo and adopting a conservative profile in their financial strategy and type of innovation. However, despite modest results some innovation indicators, the strong performance of the Basque Country in the sales of new products indicator is noteworthy. We have also observed that there is a core group of firms, particularly industrial and larger firms, that engage in significant innovation activity. It would be of interest to analyse in greater depth the strategies these firms are following and promote policies so that firms with worse innovation indicators, especially small firms, can learn from them.
The awareness-raising phase around challenges in the Basque Country regarding innovation has been extensive, and in recent years we have seen a flourishing of different programmes that are exploring the best ways to face these challenges. A report prepared by an Orkestra team (Aranguren et al., 2019) highlights the growing and increasingly more widespread awareness among all stakeholders of the need to move forward – alongside traditional forms of R&D-based innovation – on other, softer forms of innovation and targeting SMEs. Programmes like Tkgune, Hazinnova, the task forces on new business models created in most of the steering groups for Basque RIS3, and promotion of advanced services to firms driven by the Bilbao RIS3 strategy are examples of this. But examples such as the determined commitment undertaken by the Basque Country in the first decade of this century (creating the CRCs, the BERCs, Ikerbasque, etc.), which sought to correct the current shortfall in science, whose results we are now beginning to detect, demonstrate that the effects of these commitments take a while before they are clearly visible. It is therefore necessary to persevere in such efforts and monitor the impact these programmes are having on promoting innovation in upcoming years.
The last year saw a consolidation of internationalisation among Basque firms, with positive growth in their export levels, and an increase in the ‘average value of exports’ and ‘percentage of regular exporters’. However, there has been a decline in the ‘number of exporters’. In the dilemma between opting to increase the percentage of exporters or increasing the export volume of each firm, the second option appears to be more effective in the short term. As there is margin for improvement in this second area, it should be given priority in policy, while at the same time working on the traction which firms with an established export base can lend to firms taking their first steps in opening up to foreign markets.
In short, Orkestra’s 2019 report shows that Basque competitiveness has improved in numerous areas and is producing positive outcomes for its citizens in terms of wellbeing. However, the report also identifies some areas for improvement in several intermediate outcomes and determinants of competitiveness, which are key to establishing sustainable foundations for wellbeing. Additionally, as the topic-specific competitiveness report for this year discusses in detail, there are several global trends (ageing, digitisation and automation of production processes, climate change, etc.) which pose serious challenges for maintaining and improving levels of wellbeing. To this must be added the fact that the primarily socio-political uncertainties – which nonetheless have an undeniable economic dimension and impact – of which the last competitiveness report warned, have not only been confirmed, but have even been accentuated. To the greater likelihood that Brexit will take place, we can add the possibility that no agreement will be made in this regard, with the incredible disruption this may cause. The trade wars initiated by Trump have expanded into other spheres: foreign exchange (with competitive devaluation), technology, etc. Instability in Latin America (Argentina, Brazil, Venezuela, Colombia, etc.), a key geoeconomic area for our firms, is reaching worrying levels. For this reason, more than ever, we need proactive policies that foster adaptability, new pathways and the diversification of the economic structure. Therefore, taking advantage of the healthy financial situation and positive financial leverage of firms, we should particularly continue moving forward on driving innovation, especially in such areas as the education and training of workers and improvements in the skill level of their positions, continue with restoring job quality, increase R&D and innovation activity at firms (especially non-technological), and consolidate the internationalisation of Basque business, both in the number of exporters and the volume of their exports.
Aranguren, M.J., Magro, E., Morgan, K., Navarro, M. and Wilson, J. (2019). Playing the Long Game: Experimenting Smart Specialisation in the Basque Country 2016–2019 (forthcoming)