Andreu Rotger: “Foreign business people find it very difficult to set up here due to the red tape and the decisive handicap of the island’s regional framework”

Interview with Andreu Rotger, chairman of the Cercle d’Economia de Mallorca

Andreu Rotger is the current head of one of the benchmark independent entities on the island as a result of its cooperation and involvement in revitalising and modernising economic life on the island, the Cercle d’Economia de Mallorca. Rotger (Alaró, 1949) is a civil engineer who is a keen supporter of the ongoing adaptation of production processes, both in private companies and in other areas of society in general. After beginning his career working on major infrastructures, dams, tunnels and roads, he spent a major part of his professional life in the energy sector, specialising in organisational development and change management. He finished off his career as Managing Director of Gesa-Endesa, a position which he held until 2011.

How would you rate this year as chairman of the Cercle d’Economia?

One of the most interesting things has been the work of the committees and particularly the work prior to the regional elections. This very interesting work was carried out across all the committees in order to see how we would like to be governed as citizens. We are an institution which is independent in both political and business terms, and we do not aspire to be a political party or to govern, but we do aspire to be able to express how we would like to be governed. That is why the Cercle d’Economia was host to all the leaders of the political parties, and it was extremely interesting to see the presentation of our work with regard to the future government and to check the position of each party with respect to the points we put forward. We were not interested in each political party coming to do a rally or a speech, what we wanted was to know their overall position with regard to socio-economic measures.

If anyone is unaware of the tasks of the Cercle, can you describe for us its main tasks in favour of the economy of the Balearic Islands?

We are not a forum made up exclusively of economists, as we cover a whole range of professionals who are truly keen to analyse, debate and contrast different thoughts in a pluralistic manner from the point of view of citizens’ multiple interests.

The Cercle is an independent institution that does not accept any grants from the government or from anybody else, and it therefore has no need to defend party or business interests. Based on that independence, our objectives can evolve depending on how society itself evolves. At this time, and unfortunately for quite a while now, one of the issues that most concerns us and takes up our time is our region’s system of financing, which is currently insolvent. The region has a debt of 9 billion euros, when the annual budget stands at a little over 4 billion euros, i.e., the debt is more than double the budget, and for many years now the region has not had the ability to generate a surplus and the debt interest has been eating away at our finances. We are therefore in an extremely complicated situation and our response is to argue for a fairer system of financing, and we have been working on this for quite a while and we continue to do so in order to bring out a civil society manifesto. Our hope and desire is that the civil society will support our manifesto demanding a fairer tax system. It makes no sense that a region which provides almost 6% of its GDP to other regions then has the lowest resources available in all of Spain to satisfy the same needs as the other regions. Something is clearly wrong, and the Cercle will continue to demand a change in the system of financing, not only relating to income but also with regard to expenditure. When a family or a company is in financial difficulty, it searches for new income but it also attempts to streamline its spending. We do not support cuts, but we do support efficiency; we cannot spend one single euro on anything that is not a priority and a necessity. In this regard, the WHO, for example, indicates that in Spain, and we suppose that the Balearic Islands are no different, between 20% and 40% of spending is inefficient. If this is the case, and we have no reason to think that this region is an exception in this regard, we must work on efficient ways to reduce spending, not only in health, but in all other areas, such as education, social services and all public companies so that the money collected from the taxpayers’ pockets is invested not only in a strictly correct way free from any hint of corruption, but also on a well prioritised basis.

What objectives has the Cercle d’Economia and its chairman set for the coming years?

At this time, and more than ever, we need a system of parties committed to consensus and to representing citizens’ interests and not their own party interests. We are concerned about corruption and the reform of the Electoral Law. But we are also concerned about education, indeed the Cercle d’Economia worked towards reaching a social agreement for education, the economic situation for employees, with over 50% of young people unemployed, and the extremely precarious employment conditions. To take an obvious example, 25% of contracts have a duration of one week or less. A responsible and democratic society must consider all these issues very seriously. The Cercle is in favour of consensus in the essential issues – health, education, employment and the economy – and who could possibly think that the first thing a party should consider when entering government is to repeal the laws of the previous government? And I am not saying this because of the situation we have seen in recent months. Considering the creation of a tourist tax thinking that the next government might repeal it is of no help at all to the economy and the system of this country. Citizens should require all political parties to show greater responsibility in this aspect, and I insist, all political parties.

On a more personal level, tell us about your experience as an executive and as a civil engineer and what you believe to be the main needs of the Majorcan business sector

I have had the good fortune to lead various projects, remaining on average no more than 4 or 5 years in the same project. This, together with the development of the private companies has allowed me to work on the merger of different companies. One of the most striking aspects, and one that I have had to learn a great deal about, is change management, which is currently a very topical aspect that requires a lot of work. In this regard, I believe, and this matches up perfectly with what we were saying before about the consensus of political parties, that a truly good employee must nowadays have a certain willingness to manage change and a marked capacity for adaptation.

A second aspect which from my point of view is essential in the current business context relates to efficiency and ongoing improvement. I have worked extensively in benchmarking, which is simply the process by which we analyse how things are done, now not only in your own house but also in everybody else’s, in order to compare yourself with the competition or with third parties and to take those with better results than you as benchmarks, analysing those who develop the best practices to then attempt to apply them in your particular context. It involves being permanently up-to-date with how others are improving and trying to apply and enhance the knowledge that you can deduce from what others are putting into practice. That attitude of humility and constant analysis is extremely interesting.

How would you describe your relationship with Bufete Buades? How far does it date back?

It is clearly because Joan Buades was the chairman of the Cercle d’Economia and therefore my predecessor, although not directly, and if it were only for this reason we would already have many things in common. In addition, the relationship with Bufete Buades, and specifically with Joan even at this time when he does not have a direct link to the Cercle, is good and we have sometimes asked for his cooperation and he has responded enthusiastically. For example, as a case in point, Joan Buades recently participated as the moderator in a panel discussion which we organised and which was attended by foreign business people resident in Mallorca, with an extremely interesting final result for the audience.

How do you interpret what might be the immediate future for the island’s economy?

We are living in the best of all worlds from a macroeconomic point of view, in the sense that having come out of a major recession we are basically sustained by the tourism sector and our competition is, in a manner of speaking, in worse condition for many reasons. This places us in a distorted situation, but also one which we have worked hard for because you get nothing in life for free. Nevertheless, the circumstances are in our favour and it would be a serious mistake just to stay where we are.

We are at a crossroads, I would say, because this is the perfect moment to change direction in some aspects: our GDP per capita is falling systematically, dropping from one of the highest incomes per capita in Spain to positions around the average. Productivity is falling and we have been more concerned about profitability, with an approach to the macroeconomy in recent years in which profitability has been placed above productivity. I believe that we need to turn to focusing on productivity, with more emphasis on R&D and education, which is something that is not happening at the moment. We spend 0.36 % on R&D, one of the regions in Europe which least invests in innovation (the one which invests most, a Belgian region, invests 7.8%). We are not doing too well in productivity and we are having many problems in education. A regional education minister from the People’s Party recently said that we are undergoing a national emergency in education, and we believe that we have a lot of work to do in this regard which needs to be carried out intensely and quickly so as not to miss the boat.

Our socio-economic model has evolved. It is necessary to know where you come from and not to disparage the great potential which the Balearic Region has, but it is clear that we need to diversify. However, we need to do so with intelligence and training, and that is why education is a basic pillar to drive everything in this regard.

Apart from the tourism sector, what sectors are undergoing greater growth and recognition inside and outside our islands?

The work has started, and an increasing number of people are showing interest in the positive signs coming from agriculture, health tourism and the innovation associated with scientific and technological entrepreneurs in fields such as medicine and biology. In an island such as ours, we cannot aspire to develop a large industrial sector, because it is relatively incompatible due to our size, but we can be optimistic about telephone and communication services and the strengthening of services for senior citizens, which is a very important field, both due to necessity and as a driver of change in the economy.

Has the Cercle d’Economia detected any increase in the interest of foreign capital in establishing its investments and businesses in Majorca?

I believe that we have a series of advantages and also of disadvantages. We need to know what they are in order to strengthen the former, and not to lose them, and to correct the latter.

The advantages of the Balearic Islands for European business people, and this is what they have told us in the Cercle, include the safety and quality of life enjoyed on this island, which do not exist almost anywhere else. In addition, as Utz Claassen recently said, it is the most European region of Europe as citizens from the entire continent live together here in an easy and natural manner. Nevertheless, we have some very significant unresolved matters, such as the red tape, as we have been told by the foreign business people we have spoken to. But it is not only them, a recent report places us as the fourth worst autonomous region for doing business based on four indicators: the amount of red tape and the time necessary to create a company; the same for changing a name or selling a company; also for carrying out a construction project (houses, hotels, factories etc), and the time necessary to connect to the electricity grid. In the first three indices, the Balearic Islands is among the three worst regions, and the overall calculation places it in the fourth from last position.

It is very difficult for business people in general, and foreigners in particular, to set themselves up here. In addition, we have a decisive handicap which is the island’s regional framework: we need to develop a regional financing system and a special framework for the islands. This last point should be aimed at removing the disadvantages for citizens and companies of living on an island, which almost creates a situation of unfair competition.

The surcharge for importing or exporting is very significant as it directly affects a company’s decision on whether or not to set up in a region, both for selling its products outside the region, and also if it needs to import raw materials. In the case of tourism, the only important thing is the customers, as the raw material – the sun and nature – are already here, which, of course, is not the case for most sectors.