Bilbao´s striking Guggenheim museum is the symbol of an achievement:  the transformation of a heavily industrialized Basque Country, or Euskadi, into a magnet for new industries while reviving mature ones.  That first "great transformation of the Basque economy", set in motion 15 years ago, is now being followed by a second massive transformation based on innovation.

Their desire to keep up with the future, helps explain why today Basques enjoy one of the highest per capita income rates in Europe, over €30,000, an unemployment rate of just 3.5% and an economy in better shape to weather future crisis than its neighbors because of its high degree of diversity and internationalization.  The Basque Country´s 2.1 million inhabitants make up just 4.8% of Spain´s population but contribute nearly ten percent of the country´s industrial output, ten percent of its exports and over six percent of Spain´s GDP. 

 Educational rates are high in Euskadi:  it has one of the lowest drop out rates in Europe and the highest rate of science and technology university graduates.  According to United Nations human development guidelines (based on life expectancy, education and GDP), the Basque Country rates third following Iceland and Norway. 

Industry weighs heavily in the Basque economy, generating thirty percent of GDP, ten points above the EU average and twelve above that of Spain.  Quality is a priority for Basque businesses which is why the region has the highest ratio in Europe of International Standards Organization quality certificates per inhabitants.  An open economy, over thirty percent of Basque GDP is destined for export.  The Basque economy also boasts strong subsectors like energy and capital goods that experience  longer-term revenue cycles and make it less dependent on the construction sector.

Meanwhile, the Basque government has a freer hand to address problems that affect its territory due to its special economic agreement with the Spanish state which gives it the power to regulate taxes and the autonomy to manage and collect them.  In June of 2008, the Basque government introduced a €12.8 billion economic acceleration package that will focus mostly on communications, technological and energy infrastructure.

Planning for the future

While true that the Basque economy is better positioned than its neighbors to weather economic downturn, it is no less true that competition from emerging countries is intense and the world is in constant change.  If good economic health is to be maintained in the future, Euskadi will have to reinvent itself once again, is the conclusion and the only way to remain in the lead is to become a leader, this time in innovation.  How does the Basque Country plan to convert itself into the "innovation benchmark in Europe" and maintain its prosperity? 

The battery of measures planned, many of which have already been initiated, are being overseen by a steering committee headed by the Basque president himself and that include new organizations to reach out to the business and scientific communities and to private citizens. To take on this second ambitious transformation, the government approved the Basque Science, Technology and Innovation Plan which foresees total public and private spending of €6.7 billion over a three year period and, along with the Competitiveness and Social Innovation Plan approved a year earlier, lays out specific actions to achieve their goal.  Six new cooperative research centers specialized in areas such as bioscience, biomaterials and nanotechnology have been opened to add to the existing network of research facilities headed by recognized international researchers.  Existing infrastructure, such as the four Basque technology parks, is being expanded while tax breaks are also planned for small or medium sized firms that invest in technology.  Specific development actions such as the state-of-art steel research center, co-founded by the Basque government and global steelmaker ArcelorMittal and Microsoft´s new embedded software technology research center in the new public-private funded Garaia innovation pole, are starting to bear fruit.

The plans also include the creation of three new entities that help promote the global effort.  Innobasque, the Basque Innovation Agency, is a private, not-for-profit association set up to coordinate and promote innovation throughout the Basque Country and to encourage the entrepreneurial spirit and creativity at all levels. It comprises players from the Basque Science, Technology & Innovation network, private business, the regional and local authorities and representatives from the region's business federations and workers' organizations and a broad spectrum of innovation-related organizations.
Besides offering players a powerful platform and cooperation network, Innobasque also acts as a channel for activities designed to promote values and attitudes associated with innovation in Basque society. It concentrates in particular on the kind of initiatives capable of promoting the image of the Basque Country as a hub for innovation and an advanced R&D (+I) centre. Such measures will also publicize the work done by the movers and shakers that help to get innovation moving in Basque companies and organisations.

The core mission of the recently created Ikerbasque foundation for science is to attract senior international scientific researchers to the Basque Country and help retain them in order to help position the Basque Country as a reference in European research.  Ikerbasque offers research opportunities at Basque universities and well over a dozen research centers as tenured staff with competitive compensation packages.  The first round has resulted in 30 international researchers incorporated with a goal of 100 to be reached over an initial two year period.

The Basque Institute for Competitiveness will provide general oversight for the whole initiative by management and strategy experts including Michael Porter himself, the father of the theory of clusters, or geographic concentrations of related industries, as honorary president. 

Staying global

The Basque government´s plans to keep its economy competitive on a global scale include new industrial platforms in the U.S. (Philadelphia) and India to add to existing facilities in Poland and China, all of which are managed by the Basque development agency, SPRI and intended to help companies in their effort to internationalize.    These actual physical spaces range from office space to industrial parks.  In addition, in July of 2008, the government introduced a €400 million Strategic Fund to foment large industrial investment projects at home.

The Basque preoccupation with staying competitive stems from the industrial crisis that took place in the late 1970´s and early 1980´s when traditional industrial sectors of metal-working and ship building of the Basque economy had become outdated and urgently needed a dramatic transformation to continue to generate employment.  After analyzing the situation and consulting with development experts, the Basque government decided to create its first "cluster", or geographic concentration of a related industry, though a public/private partnership that included airplane engine producer ITP, Gamesa and engineering firm Sener, along with regional technology centers, university researchers, SPRI and 16 small and mid-sized companies.  Today the Basque aeronautics industry accounts for 17% of all aeronautics activity in Spain and has spun off additional advanced technology companies.  Since, eleven additional clusters and four tech parks have been opened in Euskadi specialized in new activities such as biotechnology, alternative energy, telecommunications, nanotechnology and environment. 

The first transformation of the Basque economy provides an excellent example of successful regional development policy.  Basque public and private sectors took tremendous initiative, employed creativity and assumed risks to establish and maintain Euskadi´s lead as a great place to do business.  Those same attributes, common among leaders, will be crucial to helping it reach its new goal as a leader in innovation.