02
de Març
de
2016
Act.
02
de Març
de
2016
The economic relations between Catalonia and the Balearic Islands go way back. During the War of the Spanish Succession, Mallorca was Barcelona's pantry; 300 years later, Catalonia and Valencia are the main clients of the islands -which on March 1 celebrate their annual festival- and, at the same time, they are the preferred tourist destination of many Catalans and Valencians.
For Bartomeu Rosselló, president of the Cercle Mallorquí de Negocis (CMN), the historical, linguistic and social parallels mean that the business mentalities of Catalonia and the Balearic Islands are very similar, and what's more, mean that "we share a natural market, of 400 million euros of products exported from the Islands to the rest of the State, 350 of which go to Catalonia and Valencia."
With the change of government in Palma, it seems as if relations between the Balearic Islands and Catalonia have thawed and that the "artificial barriers that have been created" are falling, says Jaume Garau, economist at the Universitat de les Illes Balears. In fact, the Islands have once again become part of the Institut Ramon Llull, but cultural matters do not have to be the only connection between Catalonia and the Islands: "The only possible relationship is cooperation, it makes no sense for Palma to compete with Barcelona in attracting congresses, cooperation could take place in countless areas beginning with the sailing industry, exports and tourism."
Dependence on tourism
The most direct relationship with the Balearic Islands is through tourism. Last year, 582,118 Catalans visited the Islands and Catalonia is the community that sends the most tourists to the Balearic Islands.
For decades, the Balearic Islands have been in the Champions League of tourism and the region has produced multinational companies that are leaders in the tourist industry, such as Meliá, Barceló and Iberostar, among others.
Dependence on tourism is the Balearic Islands' main economic weakness for Garau. "It is strange that the financial crisis has boosted tourism and has caused the Balearic economy to specialise in this sector," laments the expert, who points out that since 2008, instead of considering alternatives, the trend towards tourism has been accentuated.
So, why is tourism a problem? Two reasons, according to Garau: when living from a natural resource, the population tends to forgo training: "When living off sun and sand, it is easy to live as a waiter or a maid." In fact, out of every seven jobs, only one requires a secondary level of education. Therefore, this settling for less does not provide an incentive to innovate in "the economy or in knowledge," says Garau.
Record figures, environmental pressure
The second negative aspect is the environmental pressure that comes from tourism. For the expert, "this type of economy is comparable to one that depends on oil".
The Islands attract 25% of all tourists who visit Spain and this figure has grown during the crisis. This means that an island like Ibiza, with a surface area of 572 square metres and 140,000 settled inhabitants, last year welcomed some 2.6 million tourists from June to September. This agglomeration puts more stress on water supply, traffic, beach capacity and, over time, an acceleration in the disappearance of natural spaces.
At the end of last year's high season, tourism to the Islands produced a turnover of 9.5 billion euros, a record figure. In six months, the Islands make 90% of the whole year's revenue –which is why out-of-season tourism is on the lips of every islander. During the height of the economic crisis and unemployment, profits from tourism only grew: specifically some 30% from 2009 to 2015.
Fiscal deficit
The other great weakness of the Balearic economy is poor public funding: "We have the worst state funding in the world, there is no other country that is so badly funded. Our fiscal deficit is nearly 15%, according to government figures." For Garau, this lack of state funding impedes investment in research, education or economic diversification. This last point is the region's Achilles' heel: "There is no chance of redefining the model".
For his part, Rosselló insists that "until we have control of what is levied here, things will not get better."
Open economy
On the other hand, in being a small local market, Balearic companies are forced to export and thus the economy is open to the world.
In fact, the value of the products sold from the Islands to other countries reached 1.11 biliion euros in 2015, some 20% more than the year before. The Islands' main client is the Eurozone (the Low Countries, France, Italy and Germany especially) and the star products are footwear, essential oils and resins, locust bean gum, wine and spirits, taps, furniture and leather products.
Thus, the tourist product of the Balearic Islands is "worthy, with a good brand," points out Garau, who adds, "both in variety as well as in quality."
Tailwind and an economy in full sail
Claims
"There is no type of recognition of our insularity, when there is for Ceuta and Melilla, and they are not even islands!" Garau exclaims. However, it seems that politics is starting to take note: Palma is asking Madrid for a Special Balearic Regime with direct grants to compensate for the cost of island isoplationy (discounts for residents' flights, for example), fiscal measures (such as reduced VAT, which would boost exports and imports) and a specific fund to compensate the aforementioned costs.
Insularity has its pros and cons, naturally. Yet it has to be said that the four islands move at different paces. Mallorca and Ibiza have a critical mass in terms of population that provides plenty of opportunities –internal consumption or travelling. For its part, Menorca has half the population of Ibiza, but it has maintained a certain amount of industrial activity, even if it has gone down a lot.
Pons Quintana, Jaume Mascaró, Castell and Coinga are established companies on the island. Maria Garcia, secretary general of Menorca's small and medium-sized company federation, picks out some of the disadvantages to being isolated: "The number of flights during low season is tiny in the Pityusic Islands and in Menorca," something that makes it difficult for visitors to arrive out of season, but which also makes it difficult for people and goods to get out.
The smaller islands benefit from imports and exports that "compensate costs by 50%, but which could be much improved." Increasing air traffic –not only in terms of visitors- from the point of view of the islands' general interest is also something the business organisation is calling for.
Pime Menorca thinks that to give a helping hand to small and micro-companies "the extra expense of fiscal insularity should be compensated." The spokesperson provides the example of importing "basic raw materials for the economy, such as electric and gas energy and fuel: in Menorca we have the most expensive diesel in the State even when fuel prices are at their lowest," she says.
Of the largest hotel chains in the world, three are from Mallorca. It might be imagined that their concerns as important businesses would be heard. Nevertheless, these hoteliers are not part of the main body of business in the Balearic Islands, and so "they do not know about the needs of the Islands' companies", thinks Garau.
"We suffer Mallorca"
Apart from insularity, Menorca, Ibiza and Formentera suffer a "dual isolation" due to Palma being the capital as well as the size of Mallorca, in terms of population and territory.
Each island has an Island Council and the smaller islands have more powers of jurisdiction than the Island Council of Mallorca. "Many measures taken by Mallorca that should be taken by the Island Council are taken by the Balearic Government and in many ways they have a very Mallorcan view" that works against the interests of the rest of the islands, laments Garcia.
How to turn growth into welfare?
The per capita GDP of the Balearic Islands has gone down by 18.3% in the past 15 years –while in Spain it has grown by 3% and in Europe by 13.4%- and that is above all due to "a fall in productivity and taking poor advantage of the resources produced," says Riera.
The future strategy of the Islands to compensate for these numbers, according to Garau, lies on three pillars: decongesting tourism, strengthening the export industry –realising the potential in the traditional light manufacturing of footwear, jewellery, agriculture, and so on – and, finally, the knowledge economy. The Fundació Impulsa agrees. Riera joins Garau in thinking that "a bid should be made for intensive knowledge sectors within the services related to industry and agriculture."
"The Balearic Islands need a global competition strategy to improve productivity," says Riera, who adds: "We need better education, business sophistication and clusterisation." Thus Garau warns: "If we want to go this way, we have to strongly go for the public sector."
For Bartomeu Rosselló, president of the Cercle Mallorquí de Negocis (CMN), the historical, linguistic and social parallels mean that the business mentalities of Catalonia and the Balearic Islands are very similar, and what's more, mean that "we share a natural market, of 400 million euros of products exported from the Islands to the rest of the State, 350 of which go to Catalonia and Valencia."
With the change of government in Palma, it seems as if relations between the Balearic Islands and Catalonia have thawed and that the "artificial barriers that have been created" are falling, says Jaume Garau, economist at the Universitat de les Illes Balears. In fact, the Islands have once again become part of the Institut Ramon Llull, but cultural matters do not have to be the only connection between Catalonia and the Islands: "The only possible relationship is cooperation, it makes no sense for Palma to compete with Barcelona in attracting congresses, cooperation could take place in countless areas beginning with the sailing industry, exports and tourism."
Dependence on tourism
The most direct relationship with the Balearic Islands is through tourism. Last year, 582,118 Catalans visited the Islands and Catalonia is the community that sends the most tourists to the Balearic Islands.
For decades, the Balearic Islands have been in the Champions League of tourism and the region has produced multinational companies that are leaders in the tourist industry, such as Meliá, Barceló and Iberostar, among others.
Dependence on tourism is the Balearic Islands' main economic weakness for Garau. "It is strange that the financial crisis has boosted tourism and has caused the Balearic economy to specialise in this sector," laments the expert, who points out that since 2008, instead of considering alternatives, the trend towards tourism has been accentuated.
So, why is tourism a problem? Two reasons, according to Garau: when living from a natural resource, the population tends to forgo training: "When living off sun and sand, it is easy to live as a waiter or a maid." In fact, out of every seven jobs, only one requires a secondary level of education. Therefore, this settling for less does not provide an incentive to innovate in "the economy or in knowledge," says Garau.
Record figures, environmental pressure
The second negative aspect is the environmental pressure that comes from tourism. For the expert, "this type of economy is comparable to one that depends on oil".
The Islands attract 25% of all tourists who visit Spain and this figure has grown during the crisis. This means that an island like Ibiza, with a surface area of 572 square metres and 140,000 settled inhabitants, last year welcomed some 2.6 million tourists from June to September. This agglomeration puts more stress on water supply, traffic, beach capacity and, over time, an acceleration in the disappearance of natural spaces.
At the end of last year's high season, tourism to the Islands produced a turnover of 9.5 billion euros, a record figure. In six months, the Islands make 90% of the whole year's revenue –which is why out-of-season tourism is on the lips of every islander. During the height of the economic crisis and unemployment, profits from tourism only grew: specifically some 30% from 2009 to 2015.
Fiscal deficit
The other great weakness of the Balearic economy is poor public funding: "We have the worst state funding in the world, there is no other country that is so badly funded. Our fiscal deficit is nearly 15%, according to government figures." For Garau, this lack of state funding impedes investment in research, education or economic diversification. This last point is the region's Achilles' heel: "There is no chance of redefining the model".
For his part, Rosselló insists that "until we have control of what is levied here, things will not get better."
Open economy
On the other hand, in being a small local market, Balearic companies are forced to export and thus the economy is open to the world.
In fact, the value of the products sold from the Islands to other countries reached 1.11 biliion euros in 2015, some 20% more than the year before. The Islands' main client is the Eurozone (the Low Countries, France, Italy and Germany especially) and the star products are footwear, essential oils and resins, locust bean gum, wine and spirits, taps, furniture and leather products.
Thus, the tourist product of the Balearic Islands is "worthy, with a good brand," points out Garau, who adds, "both in variety as well as in quality."
Tailwind and an economy in full sail
All economic indicators suggest that the Balearic economy is in a cycle of expansion: in 2015 the Balearic Islands topped the ranking in business confidence, the creation of firms, it is third in terms of underwritten capital on a national level, it is recovering affiliated workers and therefore tax revenue, record levels of employment, and so on.
And business people know this. And they also know that all of these indicators have external and transitory causes: low oil prices, low interest rates and an undervalued dollar. Apart from the fact that "the conflicts in North Africa have benefited the Balearic Islands," points out Antoni Riera, director of the Fundació Impulsa Balears, created by the Confederació d'Associacions Empresarials de les Balears (CAEB).
What business worries about, according to CAEB, is how to channel investment in order to guarantee sustainable recovery over time.
Claims
"There is no type of recognition of our insularity, when there is for Ceuta and Melilla, and they are not even islands!" Garau exclaims. However, it seems that politics is starting to take note: Palma is asking Madrid for a Special Balearic Regime with direct grants to compensate for the cost of island isoplationy (discounts for residents' flights, for example), fiscal measures (such as reduced VAT, which would boost exports and imports) and a specific fund to compensate the aforementioned costs.
Insularity has its pros and cons, naturally. Yet it has to be said that the four islands move at different paces. Mallorca and Ibiza have a critical mass in terms of population that provides plenty of opportunities –internal consumption or travelling. For its part, Menorca has half the population of Ibiza, but it has maintained a certain amount of industrial activity, even if it has gone down a lot.
Pons Quintana, Jaume Mascaró, Castell and Coinga are established companies on the island. Maria Garcia, secretary general of Menorca's small and medium-sized company federation, picks out some of the disadvantages to being isolated: "The number of flights during low season is tiny in the Pityusic Islands and in Menorca," something that makes it difficult for visitors to arrive out of season, but which also makes it difficult for people and goods to get out.
The smaller islands benefit from imports and exports that "compensate costs by 50%, but which could be much improved." Increasing air traffic –not only in terms of visitors- from the point of view of the islands' general interest is also something the business organisation is calling for.
Pime Menorca thinks that to give a helping hand to small and micro-companies "the extra expense of fiscal insularity should be compensated." The spokesperson provides the example of importing "basic raw materials for the economy, such as electric and gas energy and fuel: in Menorca we have the most expensive diesel in the State even when fuel prices are at their lowest," she says.
Of the largest hotel chains in the world, three are from Mallorca. It might be imagined that their concerns as important businesses would be heard. Nevertheless, these hoteliers are not part of the main body of business in the Balearic Islands, and so "they do not know about the needs of the Islands' companies", thinks Garau.
"We suffer Mallorca"
Apart from insularity, Menorca, Ibiza and Formentera suffer a "dual isolation" due to Palma being the capital as well as the size of Mallorca, in terms of population and territory.
Each island has an Island Council and the smaller islands have more powers of jurisdiction than the Island Council of Mallorca. "Many measures taken by Mallorca that should be taken by the Island Council are taken by the Balearic Government and in many ways they have a very Mallorcan view" that works against the interests of the rest of the islands, laments Garcia.
How to turn growth into welfare?
The per capita GDP of the Balearic Islands has gone down by 18.3% in the past 15 years –while in Spain it has grown by 3% and in Europe by 13.4%- and that is above all due to "a fall in productivity and taking poor advantage of the resources produced," says Riera.
The future strategy of the Islands to compensate for these numbers, according to Garau, lies on three pillars: decongesting tourism, strengthening the export industry –realising the potential in the traditional light manufacturing of footwear, jewellery, agriculture, and so on – and, finally, the knowledge economy. The Fundació Impulsa agrees. Riera joins Garau in thinking that "a bid should be made for intensive knowledge sectors within the services related to industry and agriculture."
"The Balearic Islands need a global competition strategy to improve productivity," says Riera, who adds: "We need better education, business sophistication and clusterisation." Thus Garau warns: "If we want to go this way, we have to strongly go for the public sector."