Orkestra, the Basque Institute of Competitiveness, presents its Basque Country Competitiveness Report 2015

The Basque Country Competitiveness Report 2015 prepared by Orkestra-Basque Institute of Competitiveness stresses the need to adopt growth and investment policies so as to take advantage of the current favourable conditions for a considerable part of the Basque business network.

According to the diagnosis by the Orkestra researchers, conditions are now favourable to give the Basque economy a considerable boost. The indebtedness and profitability figures of companies point to a favourable situation to undertake growth and investment processes. Even more so in the case of the Basque industry, based on pro-cyclical sectors, which have been punished in recent years but are capable of quickly getting out of the crisis. The report by Orkestra insists on the need to make use of the current opportunities by adopting growth and investment policies and initiatives from both the public sector as well as private companies.

However, this report admits that the Basque economy is going through a two-fold reality where, together with positive indicators for the behaviour and evolution of the business activity, there are other aspects which are still quite worrying: over one third of the Basque companies keep showing losses in their balance sheets, unemployment rates are still very high and there are numerous disadvantaged social groups.

Therefore, according to Orkestra, these favourable conditions will not affect all the companies, all the sectors, or all the citizens in the same way.

The conclusions of the Basque Country Competitiveness Report 2015 show that there is no single recipe to get out of the crisis. In this regard, Orkestra proposes to keep insisting on some of the diversification dynamics and policies promoted in recent years, but stressing the need to deploy actions and measures in support of those sectors and groups which find it more difficult to join this opportunity of recovery: small companies, advanced manufacturing sector (which represents 25% of the GDP of the Basque Country) and disadvantaged groups. All this aims at quickly moving on to an innovation economy based on diversification, productive transformation and the promotion of non-technological innovation.

The time for small companies

By business size, the data in the report show that large and medium-sized companies are better prepared to face the challenges to get out of the crisis. Large companies, in spite of their having been less dynamic in recent years, have maintained their levels as regards innovation, inter-firm cooperation, exports and profitability margins, whereas medium-sized companies have strived to innovate and internationalize their product, even though this is still not reflected proportionally in terms of economic profitability.
Small companies have been the most affected during the crisis from the point of view of business expansion and profitability. In view of this situation, the report calls for public policies which deal with the specific needs of this group, with a special emphasis on the promotion of non-technological innovation.
Productive transformation

In terms of productive transformation, the report points out that the crisis has increased the weight of manufactures of the highest technological level and the services sector up to levels which can be compared to those of more advanced economies. However, this transformation is the result of the decrease in the weight carried by some activities (construction and industry, especially), rather than the result of the appearance of new activities derived from a deliberate smart specialization strategy.
As for the future, the report proposes to continue promoting strategic sectors such as biosciences-health, energy and advanced manufacturing. At this point, it calls for policies in support of advanced manufacturing above all, since it will have to face considerable challenges corresponding to the adoption of elements related to the 4.0 industry: non-technological innovation, ICTs, business models and servitization.