Arriving in Rome during a taxi strike is not an advisable undertaking. If on the day of arrival, Italy is also playing in the World Cup semi-final, the undertaking turns into a nightmare. Football takes priority over passengers’ luggage for belt operators at the airport, while abusivi taxi drivers are willing to defy the strike and abandon the national team, if only to charge an extortionate amount of money for a five-minute drive. It’s an uninviting prospect.
It could happen in any city in the world, one might think. But in Rome, unfortunately, there is an added aggravation. The stereotypically relaxed Italian attitude, usually perceived as charming, becomes unbearable when things don’t work – even worse if the disruption is punctuated with a hands-in-the-air gesture and an unapologetic “ah, Signora, it’s a strike, what can you do?”
Stereotypes are difficult to overcome – especially when they are so widespread. A recent report by engineering group Siemens and Italian consultancy Ambrosetti looked at the factors that might foster a pro-business environment and attract more foreign investment to Italy. The results show that Italy’s worst problem is its sociological and institutional environment, which includes bureaucracy and a low respect of the law – issues familiar to the foreign observer.
What is less well known, however, is how Italians respond to their country’s problems. The most interesting finding of the report is that Italians are outperforming Italy and, regardless of the environment they inhabit, have created several oases of excellence around the country.
Of course, this doesn’t mean that macro issues can remain unsolved. Analysts believe that the Italian government must be more aggressive, particularly in the labour market, to remain in the euro or avoid a permanent slump. Lack of productivity growth also needs tackling.
And Italians recognise this. “Objectively, the starting point is difficult,” says Federico Balmas, head of industrial collaboration and relations with international organisations at ICE, the Italian trade commission. Slow economic growth, an infrastructure in need of modernisation and production costs that can’t compete with countries such as China aren’t strong incentives to invest in the Bel Paese.
So what Italians did was study where they can truly add value. Rome-based Sviluppo Italia, the national investment promotion agency, analysed which sectors had the biggest investment potential and mapped Italian regions according to their capabilities. The results are somewhat surprising: aeronautics, aerospace, fine chemistry, biotechnology, automotive components, mechanics and nanotechnologies have been identified as key sectors – not exactly what might traditionally be labelled ‘Made in Italy’.
Communications with potential investors have also been improved thanks to the Invest in Italy portal, co-managed by Sviluppo Italia and the Italian Trade Commission. “Italy suffers more than most countries from a bad image,” says Giampaolo Russo, head of inward investment development at Sviluppo Italia. “We have spoken to some venture capitalists that had put Italy on a black list. An example is TVM, the biggest information and communications technology (ICT) and biotech German fund. We met them, and within 12 months they carried out two transactions in Italy.”
Others have followed. One of the most recent is Electra Partners Europe, a UK-based independent pan-European private equity firm that is opening an office soon in Milan.
The American Chamber of Commerce in Italy is also organising an event to bring together Italian businesses and US venture capitalists, says managing director of the chamber Paolo Catalfamo.
The technical exercise of Sviluppo Italia is also supported by political drive. The knowledge that a country needs political support to attract FDI is shared both at national and regional levels. “Our task [public administration] is to make available resources that enterprises need,” says Riccardo Illy, president of the Friuli Venezia Giulia region. “Foreign direct investors play a fundamental role. The economy develops in a harmonic way if small, medium and big enterprises are present. Allowing their growth and attracting further enterprises is crucial.”
Northern Italy has been traditionally the most attractive region, with Milan and Lombardy leading the way. Milan is Italy’s richest city. It has an industrial past and, although many industrial activities are still being carried out, it has developed in to a service centre, supplying a significant proportion of northern Italy. Unsurprisingly, Milan’s economy and gross domestic product growth outperform the national average.
The city sits in the centre of the Corridor 5 rail development, a European project aiming to link Kyiv in Ukraine to Lisbon in Portugal by 2015. The corridor is crucial to Italy. Its Italian route will be supported to the south by the country’s ports and Mediterranean seafront system, and to the north by the road and rail routes of the Alps passes, linking Italy to central Europe.
Milan has a vibrant pool of entrepreneurs. This is typical of the Italian economic system. In Milan, almost one out of 10 inhabitants is an entrepreneur, according to the forthcoming territorial review from the Organisation for Economic Co-operation and Development (OECD). The report, OECD Territorial Review: Milan, also highlights that the city attracted more than 40% of Italy’s FDI inflows in 2004.
Some of the biggest multinationals are based in Milan, from McDonald’s, GlaxoSmithKlein and Vodafone, to Microsoft and IBM, both of which have their Europe, Middle East and Africa headquarters in the city.
Milan is also a candidate for the Expo 2015 world’s fair. “Milan’s bid to host Expo 2015 has educational, promotional and cultural aims,” says Letizia Moratti, mayor of Milan. “Milan’s candidacy is simply the result of an analysis conducted with greater Milan, the regional administration and the prime minister, Romano Prodi, on behalf of the whole government.”
Milan caters not only for foreign investors coming into its territory, but also for local businesses aiming to expanding abroad. The Euromed fund has made available €50m to invest in joint ventures with non-European countries in the Mediterranean area. The first project in the pipeline, to be signed in the near future, is a renewables venture in Tunisia.
Next to the Milan region, both geographically and in terms of economic appeal, is Piedmont and its main city, Turin. The home of Italy’s biggest industrial conglomerate, FIAT, Turin has undergone a tremendous transformation in the past few years and has evolved from a mere industrial and manufacturing area to a sophisticated ICT centre and automotive R&D area (see Regional Boss, pages 16-17).
Northern Italy is full of success stories. The north-east, including the Tre Venezie area – defined by Trentino-Alto Adige, Veneto and Friuli Venezia Giulia – and the Emilia Romagna region, hosts some of Italy’s major economic engines, still to be fully discovered by foreign businesses. Like other Italian regions, Veneto has excelled in evolving its industrial districts (systems of small and medium-sized enterprises based on the proximity of firms) into metadistricts, where SMEs also benefit from links with universities and research centres to support their research and development (see below).
The cluster factor
Science and technology parks have been developed in almost all Italian regions, and benefit from public funding. They bring together academic research appetite and businesses’ research needs. Friuli Venezia Giulia alone offers four research organisations.
“Italy’s added value is in its clusters,” says Mr Balmas. And the success of this model is being studied by emerging countries such as China, which is particularly interested in the Italian development of SMEs.
Emilia-Romagna’s capital, Bologna, is known as ‘the Red, the Fat and the Learned’ for its political colour, its appetite and for being home to the oldest university in the western world. Probably best known for a certain pasta sauce, Bologna ranks highly in the Siemens-Ambrosetti report, taking second place, after Milan, in the listing of most attractive cities for innovation and infrastructure.
Bologna benefits particularly from its central location. It is part of the high-speed train (TAV) project, which will enhance Italian train connections throughout the country and will boost the city’s links to the rest of Italy and ultimately to central Europe. The TAV link between Bologna and Florence will be completed by the end of the year, according to Balfour Beatty, the engineering company in charge of construction. Work on the existing high-speed link from Florence to Rome and the connection from Bologna to Milan (as the rest of the high-speed project) will be completed by 2008.
However, foreign investors should look beyond northern Italy, as the central regions and the more troubled south of the country have much more to offer than the tourist-friendly rolling countryside, great weather and blue sea. In Tuscany, for example, Siemens has established an automotives plant and has managed to keep it operational uninterruptedly for as long as needed – such a result has proved impossible in the US or China, where the company has similar plants.
“One of the main criticisms about Italy is that the labour market is very rigid,” says Mr Russo. “However, in a traditionally left-wing region like Tuscany, Siemens managed to make a plant work 24 hours a day, seven days a week without any difficulties from the local employees.”
Bari, in Puglia, on Italy’s southern heel, offers another example of best practice. Getrag, the leading international producer of automotive spare parts, has found the local human resources to be a key to its success. Specialised engineers are available in large numbers and at a lower cost than in other countries. And, contradicting the stereotype of ‘the lazy South’, the absentee rate at Getrag’s Bari operations is much lower than that of its home country of Germany: Sviluppo Italia’s figures show a 3% absence rate for the Italian plant compared with 11% in Germany.
Scientific research has its southern pinnacle, too, with the polymeric and composite material engineering centre IMAST in Naples. IMAST physically brings together public and private research and businesses in a scientific area that is increasingly generating strong interest in the avionics industry.
Big multinationals are widespread in all Italian regions. Even Molise, one of the smaller regions, hosts big names such GE Bayer Specialties and Unilever, which are attracted by the Adriatic ports and road connections, well-qualified human resources and, of course, an excellent quality of life.
When things do work, doing business in Italy is indeed a pleasure.
GOING FOR GOLD
At this year’s Winter Olympics in Turin, Skylogic Italia, the Italian branch of French fixed-satellite services company Eutelsat, was a double winner. It had already won the bid to provide internal communications in the Olympic areas thanks to its innovative solutions, whereby it created a virtual private network based on satellite communications.
Giuliano Beretta, CEO of Eutelsat, says that thanks to the technology developed for the Winter Olympics, Skylogic won an important contract with the German football league TV rights holder, which will transmit the matches using Eutelsat’s platforms.
The same technology allowed Eutelsat to secure a contract with the French government, winning over a bid by Canal+. The project will expand terrestrial digital TV distribution where it is currently unavailable, such as areas close to borders or in mountains.
Milan is so proud of being Italy’s business and financial capital that it decided to go it alone in the quest for foreign investment and has launched its own network of overseas offices. While the national Italian Trade Commission has nine offices around the world, Milan Chamber of Commerce’s promotion agency, Promos, boasts a presence of 21. Its FDI project doesn’t stop there. It has launched the Invest in Milan venture, which groups all activities addressed to attract FDI and provides advice to potential investors. Communication has also been enhanced by a dedicated portal.
The initiative is very much along the line of the national Invest in Italy venture, but leverages on Milan’s stronger economy, infrastructures and positioning.
“Invest in Milan desks are the windows to promote FDI in Milan,” says Bruno Ermolli, president of Milan Chamber of Commerce. “Through them, the chamber of commerce wishes to get in contact with the international business community and provide information on the many opportunities and services that Milan offers to foreign investors.”
REDEVELOPMENT VICTORY FOR VENICE
The last land strip before the Venice lagoon is called Marghera and, until a few years ago, it was associated with heavy industrial chemistry, imposing plants and polluting chimneys.
Now a regeneration project has transformed the area into one of the most advanced nanotechnology centres in the world, which plays host to top scientists and works closely with both local and international companies.
The site has been cleverly redeveloped to accommodate the Venice Gateway for Science and Technology (Vega) centre, which houses both laboratories and research activities.
Nanotechnology improves products by changing some physical properties at a nanoscale level, and can be applied to an infinite range of products, from creating wrinkle-free fabrics to waterproofing tiles.
The initiative brings together research activities, organised by inter-university body Civen, and includes a PhD programme in nanotechnologies. Co-ordination and promotion are down to Veneto Nanotech (based in Padua, a cluster for nanotechnology companies), which is responsible for attracting public and private investments.
Veneto Nanotech organises an international competition aimed at starting up companies in the region and attracting the best nanotechnology projects, and total funds available up to its second edition are €26m.
The winner of the first competition, last year, was Singular ID Italia, a spin-off of Singapore-based Singular ID Pte. The prize of €200,000 in cash and €100,000 in-kind services funded the initial operations of the Veneto-based company.
Stefano Gallucci, general manager of Singular ID Italia, says: “Veneto Nanotech’s assistance has been crucial. We initially opened our office at the Veneto Nanotech facilities and we retained it there afterwards. Their organisational and logistical support is essential.”
Singular ID now has clients ranging from premium fashion goods businesses to the automotive spare parts sector. Sanden, an international supplier of automotive components, is just one of its latest clients.
Veneto Nanotech’s competition has also benefited non-winners. Thanks to the high profile that the competition gave them, and the judges’ feedback, some contestants have since launched their own start-ups.