The region of Murcia, one of Spain’s 17 autonomous communities, is located between Andalucía and Valencia, on the Mediterranean coast. It was established in 1982 and covers 800km with a population of 1.3 million people, one third of whom live in the capital, Murcia. Other major cities are Cartagena and Lorca.

The Murcia regional development agency, INFO, directed by Francisco Sardina, is leading an aggressive campaign to promote the region abroad. In 2006, Mr Sardina will organise more than 300 activities in support of internationalisation by Murcian firms and is keen to point out that just telling people about Murcia is attracting investors to the region.

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Murcia is exceptionally well located, not only as a confluence for shipping entering Europe from Africa and the Americas, but also as a tourism and trading destination by land and air. Its primary asset is human capital. The economy is based on capital-intensive manufacturing industries that require a highly skilled workforce, research and development centres for industrial applications, and European service centres.

“Murcia is transforming its workforce from a traditionally agriculture-based economy to a high-tech services industry, with agrofood and commercial services being the most important areas of expansion and growth,” says Mr Sardina. “In a country that has a stagnant or declining population, Murcia is bucking the trend by attracting millions of young students and workers from the rest of Spain and abroad; we already employ around 2000 people in R&D alone.”

The region has two state-funded universities (University of Murcia and the Polytechnic University of Cartagena) and one private university (San Antonio de Murcia Catholic University), which together have more than 40,000 registered students. Research is conducted at the Centre for Soil Studies and Applied Biology in Segura, the Centre for Agricultural Food Production Development and Research, and a branch of the Spanish Oceanography Institute.

Niche markets

With R&D on the rise, the local economy is taking a more innovative approach to business, creating niche markets that use new technology and sophisticated communications. These include chemicals, plastics, robotics, metallurgy-mechanics, textiles, footwear, furniture, graphic arts and the dominant agrofood industry (which includes canned foods, wines, juices, baby food and meat).

Tourism is playing an increasingly dominant role in the regional economy, developing hand in hand with the construction industry. According to data from the National Hoteliers Institute, the number of foreign travellers visiting Murcia increased by 55% in January 2006 compared with the previous year. Antonio Guillén, president of the Costa Calida hoteliers association, says that visitors are “spending more money for a higher quality of tourism than has been offered in the past”.

Other expanding industrial sectors in the region are agrofood, wood and furniture, metal, footwear and textiles, and non-metallic minerals. Communication technology is seen as the main emerging sector. Industry is strongly dominated by small and medium-sized enterprises, which account for 99.7% of companies.

Export sectors

The principal export sectors are: fruit (which accounts for 15% of Spanish exports), vegetables (50%), fuel minerals, and footwear. Exports fell in 2004 by 4% compared with the previous year at almost €4bn – 2.62% of Spanish exports. Imports grew 23% in the same period, largely due to regional dependence on mineral fuels. This translates into a trade deficit of u2.2m.

Murcian exports grew by nearly 8% between 2001 and 2004 but foreign sales are not enough to support the region’s expenditure on non-Spanish products. These market trends show Murcia’s consolidation in search of foreign business opportunities, with the EU receiving 75% of exports and the US 12%; and Asian exports increased by 19% in 2004. Three main export clients of the region stand out as most important since 2000: Germany and the UK at 16% each, and France at 12%. Exports of each product represented 60% of total exports in 2004, making the sector a strong competitor in foreign markets and a heavy supporter of regional development.

Among foreign investors, US manufacturing giant General Electric (GE) is spending €600m on its La Aljorra complex in Cartagena in the next four years. It has already spent €1.7bn on three new plants in the province and is planning to construct its first high-performance polymer production plant in Europe. The plant will employ 250 people, bringing the total number of GE employees at Cartagena up to about 600.

Sweet success

Murcia’s confectionery sector is made up of nearly 20 industrial firms with an annual income of €170m. The industry employs 1500 personnel and sends half its products abroad, mainly to the EU and US.

Joaquín Vigueras is CEO of Vidal, a sweet maker that represents one of Murcia’s more creative market segments. Mr Vigueras says: “Murcia’s confectionery firms have learned to make the most of the relatively new process of product diversification to improve their competitive position with traditional markets, which are typically centred in a small number of specialty products.” Vidal has a wide product range and an annual turnover of more than €90m.

Confectionery producers in the region work with well-consolidated foreign markets as a result of intense and traditional export activity similar in whole figures to that of the national market. This allows the companies to respond directly to international demand and maintain stability and fluidity in certain export zones.

Membership in the EU, meanwhile, has brought economic stability. By the end of 2006, Murcia will have received more than €3bn from the EU since Spain joined in 1986. During that time, unemployment has fallen by 8% in just 10 years. Murcia’s trade balance rose from €380m in 1990 to €1.4bn in 2003.

Perhaps Europe’s lasting legacy to the region will be infrastructure. Before 1986 there were no motorways in Murcia; today they stretch more than 500 kilometres. There are now 18 modern hospitals, four international schools and three universities. Murcia University, which was founded more than 700 years ago, has a new economics faculty and is internationally recognised for its modern facilities and advanced science and engineering courses.

Negotiations for EU funding for the 2007-2013 period are now closed, allowing Murcia to be weaned off foreign aid gradually. Between 2007 and 2013 it will receive €764m in EU funding, 56% less than in the 2000-2006 period. However, this year alone the region will receive €250m from the EU.

Looking east

According to Miguel del Toro, the head of CROEM, Murcia’s business confederation: “Many of Murcia’s businesses are already turning their attention towards the new Europe, where some of the subsidies once destined to Murcia will be invested.” He adds: “Key infrastructure projects, such as the new international airport and high-speed rail and road projects, must be carried out now while funds last.”

It is inevitable that EU funding gaps will have to be filled by the Spanish and Murcian governments. The region has a healthy economy and will be able to shoulder the burden without any debt problems. The latest figures from rating agencies Moody’s and Fitch, which take into account public and private sector debt, show that in December 2004 Murcia had debt of only 3.8% of GDP (the EU average was 6.5%). It is therefore better positioned than the rest of Spain to confront the harsh realities of EU funds drying up.

Wise investments

There will be only minor readjustments in agriculture because just 8% of production is subsidised. First of all, the sector has spent the money wisely, investing in profitable SMEs, which have grown considerably and swollen the regional economy. Clients include some of the UK’s biggest supermarket chains, such as Asda, Morrisons and Sainsbury’s. Second, the irrigated zone farmers have invested heavily in technology, aided by regional, national and EU funding for innovation. Computerised, water-efficient drip irrigation is being introduced and canals are constantly maintained to prevent water wastage.

Depending on the season, fresh produce sales total €1.1m-€1.3m a year, with about 80% destined for the EU. However, irrigation costs are rising. Durán is a major tomato exporter with more than 700 hectares of intensive crop. It employs up to 5000 labourers mostly from Morocco, where Durán also grows tomatoes. CEO Miguel Durán Granados says that the cost of production has risen largely due to the expense and added burden of producing and distributing water to irrigate crops. EU countries receive more than 85% of regional exports, with the rest going to central and eastern Europe.

Wine is also an important export for Murcia and is fast becoming a lucrative tourist attraction in the form of wine tours, which are popular with UK and US travellers. Average wine production is about 80 million litres a year and prospects for the sector are good due to the robust characteristics of the traditional Monastrell grape, the location of vines, good weather and soil, and vast vinicultural experience as well as the use of advanced farming and production techniques.