The key sectors of Italian economy

1
The key sectors of Italian economy

• Italian's innovation strategy and changing of
  policy during
• the EU's enlargement

2
Outline

• The distinguishing traits of the Italian economic
  system
• The changing of economic policies
• Italian's strategy for innovation in the next
  decade because of the Union's enlargement.

3
The distinguishing traits of the Italian economic
system
4
The distinguishing traits of the Italian economic
system
Macroeconomic indicators, Italy and selected
countries and regions, 1998-2005 Percentage
change from previous year, except for
unemployment
5
The distinguishing traits of the Italian
industrial system are

• An extremely dynamic network small and medium
  size enterprises
• Firms are highly specialised and very competitive
  in both the domestic and foreign markets. SME
  form a healthy  contracting and subcontracting
  market
• The presence of industrial clusters, comprising
  closely integrated systems of firms operating in
  high-specialisation areas
• The existence of family capitalism, a form of
  capitalism that is well entrenched in the Italian
  economy and has produced a number of big
  corporations
• A concentration of multinational groups in a
  number of manufacturing centres that specialise
  in specific sectors.

6
Two major competitive advantages for an
international firm that wishes to locate its
factories in Italy are

• The possibility to farm out production work to
  highly specialised  small subcontractors
• The availability of areas with a strong degree of
  industrial specialisation and vocation. In these
  districts, characterised by highly competitive
  business environment (professional approach, know
  how, technological applications, etc.) it is
  advantageous to site new plants, differentiate
  business or set up joint initiatives.

7
Subcontracting

• Subcontractors or small suppliers carry out
  production work for a large number of sectors on
  an average, a firm farms out work to four
  suppliers
• The international activity of Italian small and
  medium subcontracting firms is mainly focused on
  EU countries, mainly Germany and France, followed
  by Spain, Switzerland, UK and Austria Such
  lists are available at www.subfor.net

8
The industrial districts

• Industrial districts in Italy- are 199-
  employ approximately 2.2 million people-
  produce over a third of Italian exports.
• Italy was the first country to have implemented
  the industrial district model, which soon emerged
  as a reference point for other European countries

9
What is intended for Industrial District is a
local manufacturing system characterised by

• high concentration of industrial firms within a
  well defined
• territory
• the small or medium size of the basic firm
• high specialisation
• the availability of highly qualified human
  resources
• family-run businesses
• the legacy of the local handicraft tradition.

10
The plus points of Industrial Districts are

• an extensive web of relations and synergies
  (formal and informal) that links the players
  involved in the development process of the area
  (firms, local institutions, banks, trade
  associations, etc.)
• dynamism and flexibility arising from the highly
  competitive environment that exists in the
  district
• priority to innovation.

11
Family Capitalism

• Alongside the SME network, there is in Italy a
  form of family capitalism in which a few big
  corporations continue to exercise a decisive and
  consolidated influence on the economy of the
  country. Such is the case with FIAT, owned by the
  Agnelli family Pirelli, owned by the Pirelli
  family and Fininvest, owned by the Berlusconi
  family.
• The families generally exercise control through
  holdings, cross-shareholdings, financial
  alliances and industrial partnerships, that allow
  them to maintain control despite being a minority
  shareholder.

12
Key sectors in Italian manufacturing are

• Mechanical equipment
• Made in Italy
• Tertiary

13
Machine tools

• Despite a slowdown, the manufacturing of machine
  tools in 2001 grew 2.3. However, the aggregate
  figure includes significant differences between
  segments. Packaging, graphic and plastic machines
  surged, recording significant growth rates.
  Machines for ceramics and wood processing, on the
  other hand, slowed, while the segment
  specialising in machines for shoes and tanning
  slumped. The textile machines segment improved
  slightly

14
Made in Italy

• Textile and clothing
• Footwear
• Domestic appliances
• Food and drink  
• Italian made products have been impacted by the
  downturn of world economy. The low consumption
  and investment environment that had set in at the
  end of 2000 continued in 2001, when the slowing
  down of the US economy - worsened by the
  September 11 attacks - the persisting weakness of
  the Japanese demand and the situation of the
  Italian market have contributed to determine a
  less positive picture.

15
Textile and clothing

• 2001 closed positively for the fashion industry,
  which recorded a 1.6 growth. Numerous sectors
  within the industry performed well textiles,
  cotton, linen and wool maintained the positions
  gained abroad, notwithstanding tough Asian
  competition.
• 2001 closed positively thanks to the orders of
  the first part of the year. The silk sector faced
  some difficulties, recording a fall in the sale
  of scarves, ties and material, which make up half
  of the sector's turnover.

Source ISTAT, ISAE, PROMETEIA
16
Footwear

• With a quota of 50 of production, exports are
  the driving force of the footwear industry. Sales
  in international markets grew 59, confirming the
  trend that had emerged at the end of 2000.
• EU countries are Italy's major customers. Sales
  in Germany - Italy's leading customer - were
  excellent (18.5). Expanding markets are those
  of eastern Europe.
• Among them, Russia significantly increased the
  volume of its purchases in Italy.

Source ISTAT, ISAE, PROMETEIA
17
Footwear

• Though the footwear industry continues to be
  dominated by small and very small firms, there
  has been in the past years a greater tendency
  towards business concentration. In 2001, this
  process involved a significant number of top end
  shoemakers that have been acquired by large
  Italian and international groups.
• Mariella Burani Fashion Group, listed in the
  stock exchange, acquired 50 of Baldini from San
  Mauro Pascoli (Rimini), for L12bn
• Aeffe, the Emilia Romagna group controlled by the
  Massimo and Alberta Ferretti brothers, acquired a
  controlling stake in Pollini
• Imac from Ascoli Piceno incorporated Primigi
• Tods' acquired the French griffe Roger Vivier
• Gucci acquired a 70 stake in Regain, a leading
  shoemaker in the top end of the market.

18
Domestic appliances

• With a 0.3 growth in 2001, Italy's domestic
  appliances industry substantially maintained its
  previous positions.
• With a turnover of Euro 1.5 billion, the sectors
  achieves high profitability thanks to also the
  low degree of competition among competitors with
  respect to the free standing.
• (Some 60 of the market is divided by Merloni and
  Electrolux-Zanussi).

Source ISTAT
19
Food and drink

• The food-processing network is made up of 80,000
  firms, out of which 79 employs less than 10
  workers.
• There continues to be strong imbalances in the
  territorial distribution of the industry and in
  its structure 60 of the total number of firms,
  72 of workforce and 75 of the value added to
  basic prices of the Italian food industry are
  concentrated in the Centre-North.

20
Food and drink

• Italy is the EU's leading producer of organic
  produce, with a growing number of producers that
  are undergoing conversion. Previously purchasable
  exclusively in specialised stores, organic, or
  "biological", products are now readily available
  in large retailing chains. At a domestic level,
  more than half of the land used for "bio"
  products is located in the south, while most food
  processing factories in the north.

21
The tertiary sector

• The principal trends that are emerging are
• The restructuring of the trading, credit,
  transport sectors
• Declining employment in public administration
• The development of service providers for
  businesses (IT, professional and entrepreneurial
  activities), with an additional 70,000 workers
• The development of service providers for families
  (entertainment, cultural, social, health)
• The innovation process underway in the retailing
  sector, which continues to be dominated by small
  retailers.
• In Italy, service firms, numbering approximately
  2.5 million, employ 7 million.
• Companies with over 20 employees amount to 29.9
  of total number of firms and create 44.1 of
  added value. Firms in this bracket mostly operate
  in the transport and telecommunication sectors.
  On the contrary, the relative weight of this
  group goes down to less than a third of the added
  value in the family services (health and other
  services), trade and hotels and public entities.

22
The structure of service providers
23
The structure of service providers
Not including monetary and financial
intermediation activities, trade organisation
activities and domestic activities
24
Transport Policy and Strategy Review

• The Axis 1 Communications of the Community
  Support Framework 1994-1999 for Italy is
  subdivided in four Priority development axes
  which are
• Axis 1.1 Roads and Motorways
• Axis 1.2 Railways
• Axis 1.3 Other Means of Transport
• Axis 1.4 Telecommunications.

Fig. Operational Programme for Transport Planned
Expenditure Breakdown, Italy
25
Transport Policy and Strategy Review

• Every priority axis is implemented by means of an
  Operational Programme which is regulated by a
  detailed financial plan. The Operational
  Programmes that were analysed are
• the OP Road Infrastructures consisting of two
  Sub-programmes and seven Measures
• the OP Railways consisting of one Sub-programme
  and five Measures
• the OP Airports consisting of two Sub-Programmes
  and three Measures.

26
Transport Policy
27
Transport Policy and Strategy Review

• Road Infrastructure
• Road infrastructure improvements are primarily
  aimed at reducing the peripherality of Southern
  Italy, improving safety and integrating the road
  system with ports and airports.
• Major road improvements include
• Messina-Palermo highway - continuation of works
• Salerno-Reggio-Calabria trunk road - designed to
  increase capacity, speeds and safety
• Sassari-Cagliari trunk road - to increase safety
  and average speeds by widening the road and
  improving its overall condition
• Bari-Otranto trunk road - to boost traffic flow
  and safety and
• Brindisi-Lametia-Terme trunk road - for the
  completion of the Taranto-Port of Brindisi
  section, joining the Adriatic trunk road.
• Rail Transport
• The main aims of the rail improvement programme
  are to remove bottlenecks, improve intermodality
  and promote modal competition. Major projects,
  involving double tracking and line upgrades,
  include
• Bologna-Bari-Lecce route
• Messina-Palermo line
• Sardinia, north-south line and
• Foggia-Naples east-west link.
• Airport Infrastructure
• Airport infrastructure measures are aimed at
  reducing air traffic congestion, improving safety
  and improving existing runways.

28
Information and Communication Technology

• The structural characteristics of the Italian
  economy have a major role in shaping policies for
  ICT diffusion to Italian businesses

29
Information and Communication Technology
Indicators of innovation activity, 2000 and 2001
30
Information and Communication Technology
31
Information and Communication Technology

• These factors strongly influence the diffusion of
  ICT and must be taken into consideration if
  public policies aimed at favouring the diffusion
  of ICT are to be effective.
• The main structural factors are
• Predominance of small and medium-sized
  enterprises
• The importance of business districts
• Specialisation in sectors that are not RD - and
  innovation-intensive
• A fragmented ICT sector

Distribution of ICT firms by number of employees
32
Information and Communication Technology
Science and engineering graduates, 2001 or
latest year percentage of 20-29 age class

• A business environment characterised by
• Low levels of technical education

RD expenditure percentage of GDP

• Low research and development

33
Information and Communication Technology
Distribution of IT expenditures by region
percentages

• and characterised by
• Uneven distribution of economic activity and ICT
  infrastructure
• Lack of innovation and risk financing

34
Information and Communication Technology
IT and equipment investment change from previous
year in percent

• Cyclical factors have also had important impacts
  on the economy
• The economic slowdown
• Business investment has declined
• Increased international competition
• Public administration ICT investment

35
Information and Communication Technology
Central public administration Local
public administration expenditures on ICT
EUR million expenditures on ICT EUR million
These elements combined have tended to slow
private and public investment in ICT, but on the
other hand they have spurred the government to
use a wide range of instruments to raise ICT
investment and expand its use.
36
Tourism

• Italy has the second largest tourism capacity in
  the world with 35 000 hotels and an equal number
  of other types of visitor accommodation providing
  a total of two million beds.
• The Italian tourism industry is worth EUR 142
  billion, equal to around 11.4 of GDP, and is
  growing at a rate of 4 per year.
• Strategic location dominating central
  Mediterranean as well as southern sea and air
  approaches to Western Europe
• In terms of tourist arrivals, however, Italy
  comes only fourth in the world, behind France,
  the United States and Spain.

37
Agriculture

• Italy's agriculture is typical of the division
  between the agricultures of the northern and
  southern countries of the European Union.
• The northern part of Italy produces primarily
  grains, sugar beets, soybeans, meat, and dairy
  products, while the south specializes in
  producing fruits, vegetables, olive oil, wine,
  and durum wheat.
• If we want to consider the changing of Common
  Agricultural Policy, the agriculture sector has
  played a major role within the accession
  negotiations for the enlargement.
• Concerning the structural policies, it is widely
  known that in the aftermath of enlargement the
  disparities between regions and countries will
  markedly increase.

38
Summary

• Italy is in the midst of a slow economic recovery
  and is gradually catching up to its west European
  neighbours. Italy's economy accelerated from
  anaemic 0.7 growth in 1996 to 1.4 in 1999 and
  continued to rise to about 2.9 in 2000, which is
  closer to the EU projected growth rate of 3.1.
• European Monetary Union
• Labor
• The national debt
• The last balance-of-payments data
• Italy's closest trade

39
Summary

• GDP (2002) 1.2 trillion.
• Per capita income (2002) 21,500.
• GDP growth 0.9 (2003 est.) 0.4 (2002) 1.8
  (2001).Natural resources Fish, natural gas.
• Agriculture Products--wheat, rice, grapes,
  olives, citrus fruits. Industry
  Types--automobiles, machinery, chemicals,
  textiles, shoes.
• Trade (2002) Exports--263.6 billion.
  Partners--EU 53, U.S. 10, OPEC 4 mechanical
  products, textiles and apparel, transportation
  equipment, metal products, chemical products,
  food and agricultural products. Imports--254.5
  billion. Partners--EU 56, OPEC 6, U.S. 5
  machinery and transport equipment, foodstuffs,
  ferrous and nonferrous metals, wool, cotton,
  energy products.

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The changing of economic policies
41
The changing of economic policies

• We examine the economic implications of European
  enlargement on the European Union and in
  particular on the Italian economy
• First of all, many of the enlargement effects on
  the EU economy have already been generated
  insofar as the Europe Agreements, which
  constitute part of the negotiation on Eastern
  European Enlargement, have been effective as of
  1993.
• Secondly, we have focussed on the economic
  implications of enlargement, but the scenario is
  complicated by the demographic, institutional and
  political factors, together with the increasing
  trade among Eastern and Western European
  countries.

42
The changing of economic policies
43
The changing of economic policies
44
The impact on migration
45
The Impact on Foreign Direct Investments
Italian FDI by Country of Destination (million
euros)
Italian net FDI by industry (percentage), year
1999
46
Evaluating The Impact on Welfare

• The classical literature on welfare economics
  cites different ways to deal with the issue.
• The computation of equivalent variation (EV)
• The alternative welfare measure is the
  compensating variation (CV)

47
We dont have now the real knowledge of Italian
economic condition after the enlargement. It is
to early. So we can analyse the forecasts which
are described in three scenarios.

• The first scenario Italy and CEEC5 countries
  vis-à-vi
• The second scenario EU and CEEC5 vis-à-vis
• The third scenario specializing CEEC5
• Analysis of the three scenarios

48
EU Structural Funds

• Principles and Objectives
• Six priority Objectives for 1994-99
• The Structural Funds
• the European Regional Development Fund (ERDF)
  assistance to disadvantaged regions
  (infrastructure, productive investment, SMEs,
  local development, etc).
• the European Social Fund (ESF) promotion of
  employment (vocational training, recruitment aid,
  etc).
• the Guidance Section of the European Agricultural
  Guidance and Guarantee Fund (EAGGF) adjustment
  of agricultural structures and rural development.
• the Financial Instrument for Fisheries Guidance
  (FIFG) structural adjustment in this
  sector.Principles and Objectives.

49
EU Structural Funds
We can consider an interesting example, the
relationship between structural fund and the
development of SME.
50
EU Structural Funds
Structural Operations between 2000
2000-2006 (million euros, 1999 prices)
51
Objective 1 regions

• In general if we focus our attention on the
  objective 1 regions, we can see that the policy
  is complex and difficult because of structural
  weakness, poor social capital endowment, and the
  weak network of transfer agencies on the ground.
• These backward regions tend to lie on the
  periphery and are often characterised by low
  standards of public services and communications.

Main indicators for Objective 1 regions
52
Objective 1 regions

• In this context we had to spend some words about
  the region objective I because our University is
  localized in Campania, a region included among
  these.
• The Structural Funds thinking to future

Information on the various Structural Funds is
also available on the Europa server
http//europa.eu.int