When the Basque separatist organisation Euskadi Ta Askatasuna (ETA) announced a definitive end to its campaign of violence nearly two years ago, the guerrillas were acknowledging a political reality: in 2012’s Basque Country parliamentary elections, more than 80% of the electorate voted for parties that reject terrorist violence.

“The Basque people have had enough of violence,” says a government source in Vitoria-Gasteiz, the capital of the Basque Country autonomous region. “They see more pressing issues at stake, such as 13.6% unemployment and the urgent need to grow our economy.”

Advertisement

Compared with the rest of Spain, it could be argued that the Basques have little cause for despair. The jobless rate is higher than the EU’s 11% average, but it is also the lowest of Spain’s 17 autonomous regions. The gross regional product, at $40,457 per inhabitant, is Spain’s highest and on a par with EU countries less affected by the eurozone crisis, such as the Netherlands.

History of attraction

ETA’s demise has also debunked the myth that terrorist violence had been a handicap for foreign investment for the Basque Country. Over the past four years, the region has retained its position as Spain’s third strongest for FDI, behind Madrid and Catalonia. It has maintained a steady 4% annual growth rate since 2009, with or without ETA to take into consideration. In this same period, Madrid and Catalonia experienced declines in foreign investment.

While officially the Basque Country accounts for 3.2% of Spanish FDI, the real figure is higher as some multinationals book all their investments through their Madrid headquarters. With only 4.6% of Spain’s population, the Basque Country’s exports represent more than 9% of the country’s total, most of them to Germany and France.

Investment in the Basque Country stood at €8.7bn in 2011, the last year for which figures are available, and provided employment for 40,000 people, in particular through German, French and US companies. The emphasis is on industry, with companies such as car manufacturer Daimler-Benz, engineering and electronics conglomerate Siemens, energy and transport company Alstrom, multinational conglomerate General Electric and power management firm Eaton Power counted among its long-standing investors. Most have been operating in the Basque Country for more than 20 years.

Top priority

“Attracting foreign investment is one of our top priorities,” says Iñaki Tellechea, business promotion director of SPRI, a Basque business development agency based in Bilbao. “Our wages are not the lowest in Spain, land in the Basque Country is not the cheapest and we have a small population of 2.2 million. On the other hand, we rank third in Europe in the number of university graduates, we have four world-class technology parks and we are one of the European regions with the most attractive direct and indirect incentives to research and development. A foreign company with an advanced technology programme in mind will find the Basque Country an attractive place to invest,” he adds.

Mr Tellechea says that in terms of infrastructure and facilities, the Basque Country’s four technology parks are on a par with those of competitor countries such as the Netherlands and Germany. He also says it is worth bearing in mind the Basque Country’s 28% rate of corporate tax, compared with 30% for the rest of Spain.

The Basque Country and Navarre are the only regions in Spain that can set their own fiscal policy under a system of fueros, historical statutes which both were allowed to retain when the system of 'autonomous communities' was set up in 1978. This fiscal autonomy, which includes the ability to collect its own taxes, is one of the factors that led Standard & Poor’s to recently confirm the Basque Country’s BBB+ rating, two notches above that of Spain.

Full of energy

Historically, the Basque Country has been Spain’s heartland for shipbuilding and the mining of iron ore, steel and coal. Industry still accounts for 24% of the region’s GDP, the highest level for Spain and more than the EU average. The Basque Country did not have a big role in the property sector, the collapse of which has had a devastating effect on the wider Spanish economy in the aftermath of the global recession.

Reliance on industry has also meant a high level of energy consumption and the Basque government is developing plans to develop its resources in this area. The Basque Country has developed 20 clusters in strategic economic sectors, such as the automotive industry, environment, IT and aeronautics. The energy cluster is to receive special attention in the government’s 2013 to 2016 strategic development plan.

Investors have been looking at this sector, especially in the innovative Biscay Marine Energy Platform (Bimep), a 20-megawatt facility designed for researching, testing and utilising wave energy convertor (WEC) devices sited offshore. The €20m platform will serve as a testing ground for providing WEC developers with the infrastructure for installing and testing the technical and economic viability of their designs, with a research and data gathering centre located in a nearby port. Bimep fills a niche in the fledgling but rapidly expanding industry of offshore devices.

Going places

The Basque Country has, over recent years, transformed itself into an innovation centre in areas such as smart grid technology and electric vehicles. It has also been selected as the home of the European Spallation Source, a multi-disciplinary research centre based on the world’s most powerful neutron source.

The government has plans to develop a bioscience industrial sector and to promote the Basque Bioregion, an initiative incorporating nanotechnology with the participation of more than 70 domestic and foreign companies.

It is also setting up a major logistics centre near Vitoria, with air, road and sea connections to the rest of the world via ports in Bilbao and Pasajes, airports in Bilbao and Vitoria and a network of world-class motorways. Nearby, the government is spending €60.4m to develop the Vitoria Industrial Air Park, an aeronautics sector industrial park.

The Basque Country’s transport network will be further revolutionised in 2017, when the €5bn high-speed rail system, known as the Basque Y, is completed. The new passenger and freight system will halve the travel time between the three major Basque cities of Bilbao, San Sebastián and Vitoria, and connect the Port of Bilbao with Europe’s major railway lines.

“We expect the Basque Y, together with the newly enlarged Port of Bilbao and the city’s airport, which serves nearly 20 European destinations, to be a major incentive for investing in the Basque Country,” says Mr Tellechea.