The Report Company: What is the chamber doing to improve the business environment in the Basque Country?

Pedro Esnaola: Business depends on its surroundings. If the environment is not good, a company will not be able to develop properly. A chamber of commerce helps public authorities make good decisions that will help improve the environment, so that our businesses can grow, especially in areas like infrastructure, internationalisation, arbitration and training.

In a globalised world and in such a complicated economic situation for our traditional markets, which are essentially domestic, our role is to help companies understand this new world, find their place in it and make the most of it. Today, our companies are essentially small and medium businesses (SMEs) with fewer than ten workers, with the kind of capacity that this entails. Competition used to be solely based on price, now it’s also based on quality.

What we’ve done here at the chamber is to analyse the chain of value of internationalising a company and ensuring that we are able to help our companies with any link in that chain. Ultimately, it is about offering a product and a service that is very broad in scope but able to focus on the specific. Today we have over 100 different products aimed at helping our companies with internationalisation. There are 43 people at the Gipuzkoa Chamber of Commerce, of whom 35 work on internationalisation issues.

TRC: What is the potential for Gipuzkoa’s SMEs to internationalise?

PE: What we Basques essentially like to do is to manufacture things. We are great manufacturers. In fact, for a long time we were manufacturers for third parties. But then we realized that good manufacturing was not enough. We had to add quality to the product so it would receive international recognition. That was when conforming to ISO standards was encouraged. It’s very hard to find a services company in the Basque Country nowadays that lacks the ISO 9000 or ISO 9001 or ISO 9014. But to help companies reach that quality level, they need a proper environment, so we said: since they are small companies, let’s create business hubs. These hubs are the technology parks that dot the Basque region.

TRC: What do these technology parks do for businesses?

PE: We no longer need to simply make good products, or reach a certain level of quality that is confirmed by a third party; we also need to start making a product that is better tailored to the client. And that is where the technology parks come in. That is where support for our small businesses begins, to help them make the technological leap towards an improved product. And to support all this, we also have a lot of universities that produce a lot of engineers, which gives us a lot of grey matter. We have encouraged our industry, and today we have a structure in place through clusters, technology parks, business parks, excellent facilities and training centres, making us a hub that is dedicated exclusively to produce new quality products that are more intelligent and more powerful.

TRC: How has business in the Basque Country dealt with the economic crisis that’s been dogging Spain since 2008?

PE: During a crisis resources become very scarce, so the only way we can use those resources to do interesting things is to pool them together. One of the opportunities that this crisis has created is that each business has had to focus on whatever activity they are most relevant in.

TRC: How has the chamber been affected by the crisis, and what lessons has it learned?

PE: In a crisis, businesses start needing us again but they also need to become a lot more efficient, and that returns us to our role as tools and to much more sensible partnerships with public agencies. I think we are going to come out stronger from this crisis. The chamber’s attitude now is: what are we here for? What should we do to ensure that businesses receive our services efficiently? On top of that, the government said to us: you were receiving millions of euros in subsidies, but we are taking that away from you. The best way for a business to see whether your services are worth it is if they have to pay for it. So we decided to change from within, to adapt to what our businesses really need, and to become a true ally of the companies in their quest for internationalisation.

TRC: What synergies and links do you see between the Basque Country and the UK?

PE: From the point of view of investment, there is the US and Wall Street, and there is Europe and the City of London. So going there in search of investment is a sensible thing to do. At a time when I am seeing an interest from Britain in recovering its own industry, there is no doubt that our role as an industrial hub that has maintained its own industry over time is important.

If you looked at the Basque Country and Britain ten to 20 years ago you wouldn’t see such a difference in terms of GDP distribution. And while we have maintained this uniform line, I see that Britain now wants to return to that path, so it’s no surprise that we are a source of information for them.

I got here in 2010, when Obama was introducing his program to re-industrialise the US. I spoke with an American professor who asked me how things were going, and I explained the story about the clusters, technology parks and so on, and at the end of it he stared at me and said: “But that’s just what Obama said! This is Obama’s plan to re-industrialise the nation!” And that makes sense.

TRC: How do you go about securing investment for your businesses?

PE: In every crisis it was always a given that overcoming the obstacles depended on size. Financing, for instance: the more financing you buy, the better conditions you get. That is one reason to tell companies to band together. But is it possible to secure better financing without the size? Yes. Why? Because Basque companies are getting together to secure financing while maintaining their independence. Once we got together, we turned to the government and said: if you will provide a guarantee, we can get even better prices. So we managed to create a purchase hub for financing that the government backed through a credit union. We were able to solve the problem through cooperation, while retaining our individual corporate independence.

TRC: What is being to improve infrastructure in the region?

PE: We found that the high-speed train, for Basques, is not just useful to travel between our three regional capitals faster. What the high-speed train really does for us is it allows us to be part of a major axis linking Lisbon to Madrid to Paris and onto northern Europe. One of the advantages of the Basque Country is the economic agreement regulating taxation and financial relations between the central and Basque governments. We raise our own taxes and this gives us some leeway as to what we can and cannot do.

In Hondarribia, we realised we had an airport that did not meet security requirements, including the 150 metres necessary for a runway. The problem is, on one side you’ve got the sea, and on the other you’ve got a town, so growth was not easy. This really limited the kinds of planes that could land there. But then we noticed an airport in the City of London, which is very similar in terms of location and requirements, which falls under a category of exceptionality. So we said, we need this exception too. It also needs to be an international airport since we are a tourist area, which means we need a customs zone for passengers from non-EU countries. The latest news I have is that things are at a very advanced stage in terms of granting this exception and adding border control.

TRC: What about the plans to expand the seaport of Pasajes? Is that still an option considering the crisis?

PE: In the last 15 to 20 years the port was used for everything related to steel. There was also some automotive activity, and the Iberdrola thermal power plant. But these days, traffic in the seaport is changing and we are in the midst of a major rethinking process to redefine this port based on what is already there. Expansion would mean an investment of hundreds of millions of euros that nobody these days could defend considering the state of affairs. We want a seaport that will be useful to our companies, and as this usefulness grows, that will tell us how far we need to go and how much we need to invest.

TRC: Are there any cultural differences within the Basque Country, or does everyone simply feel Basque?

PE: I think the three provinces are very complementary. As for our character, we in Gipuzkoa are very much about action rather than words. Our pride lies at home. We don’t go out so people can pat us on the back and say “Good job!” We’d rather keep our successes to ourselves. Add to that the fact that we had 40 years of terrorism during which people who boasted about doing well soon got a visit from ETA with demands for money and extortion. In the last 50 years the average Gipuzkoa entrepreneur has been a lot more about doing things but keeping quiet about it.

TRC: How are entrepreneurs viewed in the Basque Country today?

PE: One of the things that puzzle me about this crisis is that the entrepreneur, a person who is willing to put his money at stake for a personal dream, creating a company that generates wealth and jobs, is not receiving the recognition he deserves, and even being mistreated. Why do we have lower unemployment in the Basque Country? Our market is in just as bad a condition as any other. But entrepreneurs have decided to keep jobs, in many cases by becoming personally indebted in order to keep the business going.

TRC: How is Gipuzkoa doing in terms of R&D?

PE: We are at the Basque average of 2.2 percent of GDP. We fall within the European average. This is twice the Spanish figure.

TRC: What achievement are you the proudest of so far in your time in this role?

PE: I think that given the changes in the world and our companies’ needs, the chamber needed a transformation. I believe in tools. I think the chamber, as the tool that it is, has been able to adapt perfectly to the needs of companies to offer them the services and products they need to be successful.