Examination of Witnesses (Questions 342-359)
Mr José Alberto López, Mr Marco Ortiz
and Mr Julian Talens
6 MARCH 2008
Q342 Chairman: Can I welcome you formally and
thank you very much for coming. If I may just introduce my colleagues:
Lord Kerr, to my left, Lord Trimble, also to my left, and Lord
Woolmer to my right. Mr López, would you like to introduce
your colleagues.
Mr López: First of all I would like to
express what an honour and pleasure it is to be here with you
to share our experiences. I am Alberto López. I work in
the area of institutional relations in the Delegation of Valencia.
We have a representation here in Brussels. I would like to introduce
Marco Ortiz, who is head of the environmental issues department,
and Mr Talens, head of the legal department in the Valencia Office.
I would like to thank you because in our regional priorities we
work on these issues, we have meetings and share with other regions
our experiences and policies in regional funds and also promoting
inter-regional co-operation. We have prepared some documentation
for you.
Q343 Chairman: Wonderful.
Mr López: About what we are doing here,
our main topics are the promotion and developmental interesting
and innovative experiences of our region as well as initiatives
to participate in European affairs. To speak briefly about our
economic profile, the Valencian region has a lot of product services,
both industrial and agricultural. In the industrial sector we
are highly specialised in the traditional sectors: leather, furniture,
food processing. We are developing more and more the innovative
sectors, like ceramics and optics. Thanks to the Structural Funds
we have developed some innovative services in support of the economic
sectors which are localised near to the production areas. I am
speaking of all the efforts made by the regional authorities and
all the efforts made by the universities and so on. The region
of Valencia is placed in the Mediterranean area, an area of economic
growth and development within the European Union. After 20 years
of management of the Structural Funds as Objective 1, I have to
stress that since 2007 we are in the new "competitiveness
and employment objective." After leaving Objective 1 we have
the challenge of facing a new situation after two periods of receiving
grants, subventions. We have the challenge to look for alternative
financial resources. The regional government promoted a foundation
called "Comunidad Valencia—Región Europea"
which aims to promote participation of the economic and institutional
bodies of the region in European initiatives. With this aim, the
Foundation, which is composed of economic institutions, private
companies and municipalities, all of these members and with the
support of the regional government, have been working very actively
since 2003 in the participation of European projects. During this
period we have experience of participating in some projects, like
LIFE INTERREG or Leonardo. Sustainable energy development, renewable
energy sources, innovation research, technology transfer, all
of these topics have become more and more familiar to us and they
will be more and more familiar in our municipalities and economic
and social bodies. We are going to distribute some data to you
about our participation in these projects. In Brussels in 1997
we had seven people working in the Valencian Regional office;
after 2003 when the Foundation was created, the staff grew to
45 people. I have to say that the economic and social bodies are
highly interested in these topics and they can send people for
six months or one year periods to gain skills, and experience
before going back to Valencia. Young professionals are learning
here in Brussels, they are sharing with other regions how to participate
in projects in order to participate in European projects. That
is one of the special interests in attracting and developing skills
in our region. I would like to give the floor to Mr Ortiz to develop
these topics more.
Q344 Chairman: That is a most useful
general introduction.
Mr Ortiz: I will be very brief because Alberto
made a good introduction of the region. I would just say that
Valencia is the "ten per cent region." We are more or
less ten per cent of the Spanish population and we are globally
ten per cent of the GDP. Spain's GDP is $1,200 billion and it
would be $90 billion in Valencia, so it is a bit less than ten
per cent. The region has evolved a lot in the last 20 years in
the sense that the traditional industries, some of which Alberto
mentioned, have been transformed thanks to the great amount of
funds that Brussels has put into Spain. The region was very wise
in the way it managed to distribute and use the funds. The fact
is that we are out of Objective 1 now. Our GDP has improved in
such a way that we are out and it is good news. Those big amounts
of funds were used mainly in the construction of infrastructures
and also to transform some industries which depended heavily on
manpower. One of these industries was the textile industry. They
suffered because of seasonality in the sense that for certain
months of the year they were not working, people were out of work
and there was a high amount of unemployment. The problems were
similar in the agricultural sector. The transformation has been
to a more effective and intense industry in the sense that people
are working in industries that work for the full year. There is
a very big automotive cluster around Valencia with Ford motor
industry, a big factory, with a great number of industry around,
suppliers and other metallic companies or sectors connected to
this industry. There is another big cluster in the north of the
region connected to the ceramics industry that Alberto was talking
about. The ceramics industry in the last 20 years has been one
of the leading industries in the world with Italy, (the region
of Emilia Romagna, Bologna). Italy and Spain produce 85 per cent
of the European production. It is all located in two areas. You
have more or less 200 factories with around 25,000 people working.
It is very big. These big clusters have been pulling in a lot
of manpower and pushing the local administrations to invest a
lot of resources in infrastructure. For instance, in the area
of the ceramics industry the natural gas network coming from the
north of Africa in the last 20 years is now supplying all these
industries on a regular basis. Some of those factories—for
instance—"Almost earn more money sometimes, by producing
electricity than by selling ceramics." They co-generate energy
in their factories, in fact they use so much energy that they
have to co-generate electricity in order to make the ovens work,
and sometimes they produce so much electricity that they can sell
the surplus on the grid. The EU funds have completely changed
the landscape in the sense that a region that 30 or 40 years ago
was more an agricultural society—"oranges for instance;
the first oranges were sent to the UK at the beginning of the
last century with the first train cooled carriages from Valencia,
and now on boats," and agriculture, which was one of the
main pillars of the economy—is three per cent, as a sector,
and in the global GDP of the region, agriculture, is down to 2.8%,
"which is very low," even lower than the rest of Spain.
One of the major topics that Alberto stressed was the creation
of the Research Institutes. We have an organisation called IMPIVA
which is the Institute for Small and Medium Enterprises which
was headed by the regional Ministry of Economy. The IMPIVA was
developed a network of 14 Technology Institutes which address
each of the sectors—for instance—one for wood and
furniture; one for plastics; one for ceramics; another one for
the metallic industry. These Institutes work in connection with
the IMPIVA sometimes with universities but not always. Most of
the time the Institutes work with the companies and they try to
address the direct problems that the industry faces. In the case
of Valencia, one of the main things was to be innovative because
with globalisation and the introduction of many products coming
from the Far East it has been a big problem for some sectors in
the region. The specialists say that thanks to the fact we have
those Institutes we will be able to keep the industries profitable
and competitive. The Institutes gave the opportunity to the companies
to transform their production systems quickly and they are competitive
for the time being. We do not know for how long, but at the moment
they are. All this thanks to the innovation which has been applied
in the manufacturing sector. We are not a region intensive in
R&D development, we use more innovation. We innovate by applying
new technology in the chains of production.
Q345 Chairman: In all of this, have
the EU funds been critical or would you have done it anyway?
Mr Ortiz: They would have done it perhaps, but
the funds were critical in the sense they were used to create
these networks of Institutes and these EU funds were used to train
the workforce and also to develop many programmes to adapt manpower
to the new systems because in many cases they had to introduce
new machinery with more sophisticated equipment. They had plans
and they developed them. They used these funds on many of the
programmes to improve the quality of local manpower. As you know,
one of the sectors which is very important is tourism, it is more
than 15 per cent of our regional GDP, which is very high, and
this sector is one of those where a lot of attention has been
focused by the regional government. The regional government is
very focused on this sector because in certain areas they have
managed to avoid the fact that in some months you do not have
many visitors so you have to close some hotels. They have tried
to avoid that and create all-year round tourism. They are offering
the possibility to very different clients in the sense that in
winter we have pensioners, in Spain we have a system called incerso,
which is a department from the Ministry of Social Affairs, which
allows pensioners to travel around the country at very low prices.
It is a way to fill hotels that otherwise would be closed. The
system keeps hotels open, and people are working, the government
promotes this type of activities in the weak seasons.
Q346 Chairman: I must come and join
your hotel immediately!
Mr Ortiz: It is very funny, because in winter
in some areas you see all of these people doing gym on the beaches.
Hotel owners in all of these areas, where some are well-known
and some are less, are very happy because these people are very
tidy, they do not bother anyone and do not break anything, which
is very different from the summer when we have ten million people
coming over. It is one of the ways they try to keep the economy
and the system running. I would say in some other areas of Spain
it is the same but we have some proper focal points there.
Q347 Chairman: You say you are the
ten per cent region.
Mr Ortiz: Yes.
Chairman: I have forgotten what Spain's share
of the Structural Funds is for 2007-13.
Q348 Lord Woolmer of Leeds: How much
does your region get for 2007-13?
Mr Talens: I think it is about ten per cent
too.
Chairman: Spain gets about ten per cent and
Valencia gets a little less than ten per cent of that.
Q349 Lord Woolmer of Leeds: You do
not know what the Valencia figure is for the seven year period,
roughly?
Mr López: We have no figures on that
yet. We can provide you with that.
Q350 Chairman: That would be kind.
Mr López: We deal with around €3.5
billion in Public Eligible Spending and we are now at around 2,000
billion, in Structural Funds during 2007-2013 period. That is
a new situation for us.
Q351 Lord Kerr of Kinlochard: The
old Member States, the existing Member States, including Britain
and Spain, invented the new doctrine about absorptive capacity
and four per cent as a ceiling on what, say, the Poles could spend
because they would not have the capacity to absorb more. We did
not invent this doctrine when we invented the Cohesion Fund. Spain,
as a whole, and I am sure Valencia, was receiving six or seven
per cent of GDP at the peak, is that right?
Mr Talens: I think that percentage is too high.
Q352 Lord Kerr of Kinlochard: It
was above four, I think. We have invented a new doctrine for good
reasons. You are now going down having peaked at five or six.
Mr Talens: I think so, but I am not a specialist
in this field, so I should not be talking about that. I am just
a member of the Legal Department and I should apologise again
for our not precise English.
Mr López: It has been developed by the
Ministry of Economy in Valencian Region.
Q353 Chairman: It would be good if
we could be provided with those figures. One of the questions
we are trying to address is, if you like, a consumer's eye view
of Structural Funds. We know what the Commission thinks, we know
what they think they are doing, how they are distributing it and
how they feel their relationships are with the people who receive
these funds and we are therefore after, and we are asking you
and Poland, finding out what the recipients think. Are there any
barriers or difficulties? Do you find Structural Funds hedged
about with bureaucracy? Are there things that could be improved
about the administration of Structural Funds? Any comment would
be welcome.
Mr López: For Valencia the most important
point is security of management, that is less bureaucratic, but
it could be very important for us and we are working on that with
the Commission. We are working on the ratio of distribution. The
Commission in the beginning are going to send around—
Mr Talens: They are going to concentrate the
funding at the beginning of the transfer. In a short period of
time they are sending the majority of the funds.
Q354 Chairman: They are frontloading.
Mr López: That means we are ending with
this period, so the execution of projects will end and at the
same time we will be absorbing this big amount of money and that
could mean a complicated system.
Mr Talens: Even logistical problems.
Mr López: That is one of our main concerns
for this new period.
Q355 Lord Woolmer of Leeds: According
to my calculations, in pounds sterling, which will mean nothing
to you now, it is slightly under £10 per head of population
per annum, and the Polish visitors we had just now receive £33
per head and another £100 a head, so it is quite a difference
now from where you were. Can I just ask a question on the costs
of administration and management of these programmes and so on.
Some witnesses have said that the costs of administering and managing
EU programmes from the project level and beneficiaries themselves
through the national government level, through the Commission,
really adds up to quite a lot of money but also time, effort and
so on.
Mr López: That is a very interesting
question.
Q356 Lord Woolmer of Leeds: Is that
a reasonable point?
Mr López: The management is an important
question and for that reason I think it would be better to contact
the Regional Ministry or pay a visit to our region and have a
meeting with the Minister of Economy and our Ministry composed
of around 120 people with 20 years' experience of managing funds
and also the administration of public aid according to the European
Commission guidelines, which is very important. This is a very
technical question and it would be better for them.
Q357 Lord Woolmer of Leeds: In your
Office you have businessmen and women come to your Office to talk
about relationships with the Commission and how things are handled
and you do not find the private sector complain quietly about
the bureaucratic processes and so on? That is not an issue that
you find raised with you at all?
Mr López: The funds and procedures have
been established according to the administrative procedure and—
Mr Talens: Of course, the private sector wants
easier access to finance, but we are managing public funds too.
I do not know if we have been able to find the right equilibrium
point. I have not heard about any complaints from big companies,
but I am not a specialist in this matter, as stated before..
Mr López: Also, the Commission have contacted
us to share our experience with the new enlarged Member countries
on the management of Structural Funds and how to develop them
and the development of acquis communitaire and our experience
of the municipalities participating in these complex problems.
Q358 Lord Kerr of Kinlochard: I was
very interested in what Mr Ortiz said about innovation and encouraging
modernising production methods in industry in Valencia. We were
there talking about public sector assistance to the private sector
and these are private sector companies. Why did they come to you
and, through you, to the Structural Fund? Why did they not go
to a bank and say, "We have this brilliant idea"? Coming
to you, and the Structural Funds, means a bit of delay, a bit
of form filling and bureaucracy, whereas the bank, if it likes
the idea, gives you the money. Adam Smith said, "Invent a
new mousetrap and the world will beat a path to your door".
Convince me that it was not going to happen anyway through private
sector banking.
Mr Ortiz: In Spain we are a country with a strong
administrative tradition. We have had a Public Administration
for 500 years. People rely a lot on the Administration, it is
something serious. Apart from the private banks, which are very
strong, as you know, because they have been lately merging with
some British banks.
Q359 Lord Kerr of Kinlochard: Like
British banks all the time.
Mr Ortiz: We also have the savings banks which
we call Cajas de Ahorros, which are savings banks which have strong
ties with the local regional government and in a way are public
banks, they are not considered to be private banks. The Administration
works regularly with these banks because 20 years ago—"all
these things have changed, interest rates were very high, 20 years
ago it was 15/16 per cent and now it is four per cent"—it
was a problem to give money to someone because of the risk and
these savings banks—for instance—Caja de Ahorros del
Mediterraneo or any others in the region, were a way of lending
money to people and companies at lower rates with quite good conditions
and the risk was taken by the Administration. There is strong
confidence normally in the administration. The administration
is normally respected. I know that in other countries it is not
the same and it is more complicated or more complex, but in our
case that was why it was easy to adapt to the new system. In the
early 1980s when we came into the EU there was a very big transformation
in society. Apart from the political transformation, there was
a social and economic transformation because the state was very
present, a bit like in the eastern countries, the central state,
Madrid, was present, petrol industry and distribution was centralised,
the motorcar industry was nationalised and there was a very big
movement to decentralisation and privatisation and the regions
had some word in it.
Mr Talens: I would like to add some ideas to
this. It is true that we have a long tradition of bureaucracy
but from what I have read about your administrative tradition,
continental Europe is more bureaucratic, even in the private financial
sector. I could not say that our public administration is much
more bureaucratic than most of our private banks, I could not
say that.
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