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The key sectors of Italian economy

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Italian's strategy for innovation in the next decade because of the Union's enlargement. ... case with FIAT, owned by the Agnelli family; Pirelli, owned by the Pirelli ... – PowerPoint PPT presentation

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Title: 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.

40
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
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