Canary Islands

Region

Introduction

The Canary Islands (shared capitals: Santa Cruz de Tenerife and Las Palmas de Gran Canaria) are composed by seven islands located nearby the South coast of Morocco. The territory has an extension of 7,447 km2 and is inhabited by 2,177,048 (2018), accounting for 4.7% of the total population in Spain (Eurostat, 2019). Besides already being one of the regions with the highest density of population, it is also among those that have been consistently gaining population over time. The Canary Islands present a wide range of possibilities in terms of technological innovation due to its strategic geographical location, its special fiscal status and the high quality of human capital it holds. On the other hand, this region also suffers from clear weaknesses caused mainly by the fragile innovative and environmental systems of the islands. The business ecosystem of the Canary Islands relies heavily on the geographical location and the particular characteristics of the archipelago. However, as expected, it is mainly devoted to the service sector, with special emphasis in tourism.

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Economy

Socio-economic profile:

Important factors such as its insularity, the distance from the European continent and the lack of raw materials constitute important disadvantages for the development of the Canary Islands’ economy. In order to compensate for these drawbacks, the Canary Islands enjoy a special economic and fiscal regime, which contains particular regulations about the VAT or its free zone characteristics, among other specific normative.

In 2017, the gross domestic product (GDP) of the Canary Islands was €44,503m, doubling the numbers in the late 90s and making it the eighth Spanish economy (Eurostat, 2019). At a slower rate, the GDP in purchasing power standard (PPS) per inhabitant has been growing till 22.700 in 2017, staying below the national and EU average, 27,600 and 30.000, respectively (Eurostat, 2019). The gross value added (GVA) in Canary Islands is structured as follows: the primary sector accounts for 1.4%, industry and construction are responsible for 7.9% and 5.8% of the total, respectively, while services dominate the economy with a share of 84.9% (Eurostat, 2019). In spite of being an agricultural society not long ago, the primary sector barely has any weight nowadays. Banana, tomato and cucumber are the three main products while tobacco production is entirely for exporting. Farming and forestry are even less important. The industry and construction do not have a big impact either, although the latter is showing signs of recovery. Thus, the economy of Canary Islands relies in the service sector, especially in those activities related to tourism (Instituto Canario de Estadística – ISTAC, 2019).

In 2018, the unemployment rate in Canary Islands was 20.1%, comprising 225,300 people. The figures show an improvement in the last years yet it is rather above the national and EU averages of 15.3% and 6.9%, respectively.

The Canary business network consists largely of freelances and SMEs. This is mainly motivated by the low risk approach of the regional entrepreneurs and the difficulty to attract companies due to the cumbersome bureaucracy, the low production and the lack of qualified professionals in several areas. Nonetheless, the environment expected for the Canary Islands in the coming years is rather positive, as the GDP is forecasted to experience constant grow, confirming the turnaround of the economy while job creation and business are expected to flourish.

Research, Development & Innovation

RTDI profile:

The legal framework in terms of research, technological development and innovation in the Canary Islands is established by the Law 5/2001, of July 9, regarding the promotion and development of scientific and technical research. It also provides a systematic regulation of the activities of the public authorities in the matter. The Canary's research, technological development and innovation (RTDI) system follows the so-called “Triple Helix” model as it is composed by three interconnected components: companies, public administrations and research centres. Accordingly, he main agents of the public RTDI system are the two Canary universities along with their research centres and the research and technology centres subordinated to the Canary administration, such as the Instituto Canario de Ciencias Marinas (ICCM), the Instituto Canario de Investigaciones Agrarias (ICIA), the Instituto Tecnológico de Canarias (ITC) and the Fundación Canaria de Investigación Sanitaria (FUNCIS), as well as the Instituto de Astrofísica de Canarias (IAC), with shared property. These institutions play an important role in the training of researchers as well as the generation of scientific knowledge, while also being an important source of technology for the industry sector. Another public system agent is the Administration that provides a vital contribution through planning, financing, promoting and facilitating support services and innovation support structures. The RTDI system also involves companies that invest in innovation, financial providers and private service companies specialised in supporting public organisations and enterprises. In addition, the Canary Islands Government has created the Canarian Spaces and Technology Parks, conceived as physical spaces in which knowledge-based companies have the environment needed to engage in high productivity and high value added activities. The spaces have shown their great importance as change agents in the production model in Spain, aiming to increasingly support the application of science, technology and innovation in businesses. The parks stimulate and manage the flow of knowledge and technology amongst universities, research institutions, companies and markets, promoting the creation and growth of innovative companies through incubation and provide value-added services as well as high-quality space and facilities. The development of technology parks in the Canary Islands, driven from the public sector, enables in a short-term basis unemployment mitigation investments. At the same time they establish a solid foundation for changing the Canarian production model in the mid-term. The research & development (R&D) expenditures were €199m in 2016 (Eurostat, 2019). This represents 0.47% of the regional GDP, below the national average (1.2%) and far below the EU average (2.0%). Unlike in other regions, higher education is the sector that contributed the most, with more than half of the total expenditures, followed by the public administration that provided 31.8%. Private companies and non-profit private institutions only assured 17.8% of the expenditure (INE, 2019). In 2017, there were 3.360 people working in R&D, particularly in the high education and public administration (INE, 2019). In high technology sectors, the number of employees was 15,900, which corresponds to 1.6% of the sector employment in Spain and 1.7% of the total employment in the region (below the national average of 3.8% and the EU average of 4.0%) (Eurostat, 2019). The population aged 30-34 with tertiary education in the region reached 35.7% in 2018 (Eurostat, 2019), below the national and EU averages of 42.4% and 40.7%, respectively. On the other hand, Canarias has a high performance when it comes to broadband diffusion: 99% of the households had internet access in 2017, the same as the national average (Eurostat, 2019). The region submitted 10.5 patent applications to the EPO, which constitute 0.8% of the total applications presented by Spain in 2012 (Eurostat, 2019).

Regional Innovation Scoreboard results

Latest Regional Innovation Scoreboard results:

Based on the results of the Regional Innovation Scoreboard 2019 (RIS 2019), Canarias ranks as a “Modest + Innovator”, with innovation performance increasing over time. The Regional Innovation Index (RII) in 2019 was 0.224 (normalised score), 70.1 relative to Spain and 46.1 relative to the EU. The RII change between 2011 and 2017 was 3.6 (normalised score). The RIS 2019 also provides an analysis of the regional performance in each innovation indicator, allowing the identification of the region’s relative strengths and weaknesses when compared to Spain and the EU. Thus, the region has its best performances in the following indicators: • Lifelong learning (normalised score of 0.260, 92 relative to Spain and 83 relative to the EU); • International scientific co-publications (normalised score of 0.424, 80 relative to Spain and 74 relative to the EU); and • R&D expenditures public sector (normalised score of 0.410, 82 relative to Spain and 72 relative to the EU). On the contrary, the region’s worst performances are related to the indicators that follow: • Innovative SMEs collaborating (normalised score of 0.059); • R&D expenditures business sector (normalised score of 0.110, 28 relative to Spain and 19 relative to the EU); • SMEs innovating in-house (normalised score of 0.149); Some relative scores for comparison are not available due to confidentiality.

Governance

Governance profile:

In Spain, the Council for Science, Technology and Innovation Policy (Ministry of Economy, Industry and Competitiveness of Spain) defined the Spanish Strategy for Science, Technology and Innovation (ST&I) 2013-2020. This Strategy sets the priorities for the elaboration of the National Plan for ST&I 2017-2020 as well as the Regional ST&I Plans, whose interaction resulted in the Regional Smart Specialisation Strategies. It is important to note that Spain is a decentralised country and therefore the regional governments and its assigned agencies are the main responsible for the RDTI steering. Thus, the research, technological development and innovation (RDTI) Canary system is not conceptually different from any other system of research and technological development, being formed by a set of agents interacting, competing and collaborating with the ultimate objective of creating value and economic development. In addition to those already mentioned, the following institutions play a significant role in the management of the R&D system: • Regional Ministry of Economy and Treasury of the Canary Islands. It is responsible for proposing and implementing the Government's guidelines related to the budget, finance, taxes and auditory aspects. It has adopted two different lines of action to promote innovation. The first one covers the creation, management and evaluation of the Operational Programmes financed by the European Union, such as ERDF and ESF, while the second is a specific tool for the Regional Ministry to manage and finance different measures; • Regional Council for Employment, Industry and Commerce. Some of its main tasks include economic diversification; support for the industry, crafts and canary trade; energy policy; and promoting innovation in the business sector related to its activity areas. In addition, the organisation is responsible for proposing and implementing the Government's guidelines; • Sociedad de Desarrollo Económico de Canarias. From February 2012, the Government of the Canary Islands has opted for a new management team to refocus the company's strategy, encouraging the co-investment model by public-private partnerships to achieve an amplification of available public resources and a better access to finance and investment possibilities for entrepreneurs and companies. To this end, since 2012, Sodecan has designed and implemented a set of financial instruments, soft loans and support programmes for private investors and venture capital funds; and • The Canary Office of Research, Innovation and Information Society (ACSII). Government agency, which promotes scientific research and development, telecommunication infrastructure and the information society services. The ACIISI works with all socio-economic sectors involved directly and indirectly in areas related to research, innovation and information society. It supports collaboration with the knowledge creation centres, especially universities and research centres, focusing on enterprises that are crucial in transforming the research in economic realities through innovation. The main objectives of this regional agency are: • Promoting and coordinating research, technological development and innovation in the regional universities; • Managing the research, development and innovation promotion programmes; • Promote and coordinating the policies, technological projects and actions for the development and introduction of information to the society, also fostering the introduction of information technologies in all economic and social activity areas; • Promoting the use of information and communication technologies in the society; • Promoting and developing policies for the adaptation of the autonomic normative to the common normative; • Becoming the executor and operator organisation of the information society Canary forum and the Canary observatory of telecommunications and information society; • Promoting diagnostic studies of the enterprises' situation and citizens related to the information and communication technologies as a first step for the promotion of the use of those technologies in all productive sectors and social areas; • Elaborating and managing programmes, aimed to promote the advanced telecommunications programmes; and • Formulating special telecommunication policies.

Policy

Policy trends profile:

The Canary Islands Government has developed a Smart specialisation strategy (RIS3) that builds on a sound analysis of the regional assets and technology. The Smart specialisation strategy is an innovation policy concept designed to promote the efficient and effective use of public investment in research. Its goal is to boost regional innovation in order to achieve economic growth and prosperity, by enabling regions to focus on their strengths. The region's smart specialisation strategy roughly outlines a vision for Canary Islands in 2020 as follows: • Leader in the tourism sector with a genuine, excellent and sustainable product; • European reference in the mid-Atlantic, as a meeting place for cultural and economic exchange among three continents; and • With a full and effective integration into Europe and in the international flow of ideas, people, goods and financial resources. Moreover, the Government of the Canary Island has worked with the European Commission in the planning of the new ESF and ERDF operational programmes for 2014-2020. Based on the vision above, RIS3 Canarias has been able to select the following priorities: • Smart leadership of tourism; • Canary Islands, smart Atlantic reference; • R&D socioeconomic valorisation, specialisation and reinforcement in astrophysics and space, sea related sciences, biotechnology and biomedicine associated to biodiversity and tropical diseases; • Digital Agenda; and • Green growth and sustainability. To complete the previously described actions, a combination of instruments has been selected. The financing sources required to implement these instruments can come from: Canarias ERDF 2014-2020 Operational Programme; Canarias FSE 2014-2020 Operational Programme; Rural Development Programme (Regional), Canarias - Spain; FEMP Operational Programme of Spain 2014-2020; PUR Fund; H2020; FEC, and other possible public financing sources, including those of state and regional origin. Certain initiatives might receive funds from other regions and countries, since these are projects with a socio-economic impact that goes beyond Canarias, and even beyond Spain. The content of the operational programmes and, therefore, the actions and investment priorities that arise from within it, are developed in line with the objectives of the Europe 2020 strategy. In the Europe 2020 strategy, the European Union sets out objectives that should be achieved by 2020 in five main areas: employment, innovation, climate change, education and poverty. Based on that, the Canary Islands operational programmes 2014-2020 contain a list of 11 thematic objectives that are in line with the Europe 2020 strategy. These objectives will be developed through investment priorities, and only such actions that fall within those goals will be supported. The objectives are: • To improve the use and quality of ICT and communications and the access to them; • To improve the competitiveness of SMEs in the agricultural sector, fisheries and aquaculture; • To promote the transition to a low carbon economy in all sectors; • To promote climate change adaptation and risk management and prevention; • To preserve and protect the environment and promote resource efficiency; • To promote sustainable transport and remove bottlenecks in key network infrastructures; • To promote sustainability and quality in employment and support labour mobility; • To promote the social incorporation and fight against the poverty and any form of discrimination; • To invest in education, formation and vocational training for the acquisition of capacities and a permanent learning; • To improve the institutional capacity and the efficiency of the public administration; • Urban sustainable development; and • To reduce additional costs that hinder the outermost regions (OR) development. The outermost region of the Canary Islands, by its nature, has a specific additional allocation to offset the additional costs that hamper their development.

Activities linked with Advanced Manufacturing

Activities linked with Advanced Manufacturing:

As already explained, in terms of the structure of its economy, Canary Islands are much more oriented towards services than the average of the Spanish economy (about 12 points above), which reduces the relative weight of other sectors. The business network consists of freelancers and SMEs, which represent more than 90% of the business tissue, a percentage far greater than the national average. This structure will, therefore, influence the R&D strategy. Thus, the smart specialisation strategy of the Canary Islands (RIS3 Canarias), developed by the ACIISI and the Government of the Canary Islands, emphasises the importance of tourism within the service sector. However it also includes the importance of promoting advanced manufacturing, the transfer of knowledge and the increase of R&D activities. According to different reports, the RDTI has a poor entrepreneurial and innovation culture implementation in companies located on the Canary Islands. This can be partially explained by their limited interaction with public research centres and universities as well as their unawareness on what they offer. The immediate consequence is the loss of competitiveness due to the limited introduction of new technologies and reduced investment both public and private in RDTI. The RIS3 tried to change this situation by establishing five priorities to face some of the main challenges, two of which are closely linked to the Canary's distinctive areas: • Smart and sustainable leadership in tourism; and • Canary Islands as a European mid-Atlantic reference. The other three are common to all European regions: • Socio-economic valorisation of specialised R&D; • Digital Agenda: enhancing productivity with ICT; and • Green growth: assuring sustainable growth. In addition, the Canary Islands' Government has launched a major financial package to boost new business activity and entrepreneurship, to which the European Regional Development Fund contributes through the Canary Islands 2014-2020 ERDF Operational Programme. It provides 85% of the funding, to which the remaining 15% must be added directly from the regional government.

As mentioned, since September 2012, the Government has entrusted ‘Sociedad de Desarrollo Económico de Canarias” (Sodecan) with the development and management of the financials. Some of the budget aims to promote the development of advanced manufacturing. For instance, there is a Loans and Guarantees Fund to promote business innovation projects and the Loan Fund for the Financing of R&D Projects (associated with the Technology Parks Network of the Canary Islands fund line), etc. RIS3 Canarias has defined one priority that is related with industrial modernisation and that can also be related with the thematic areas included in the Smart Specialisation Platform for Industrial Modernisation: R&D socioeconomic valorisation, specialisation and reinforcement in astrophysics and space, sea related sciences, biotechnology and biomedicine associated to biodiversity and tropical diseases (related with the thematic area Medical technology).

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Canary Islands

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Activities linked with Advanced Manufacturing