Italian industry comes calling

Written by Subhash Agrawal | Updated: Feb 5 2005, 05:30am hrs
Two weeks from now, a large chunk of Italys whos who will be gathered in New Delhi as part of Italian president Carlo Ciampis official visit to India. This includes five cabinet ministers, 100 top CEOs and over 400 senior people from government, industry, banks and public life. Between them, they represent almost $200 billion in global sales, or roughly half of Indias GDP. By all accounts, this could well be the biggest business delegation Italy has ever sent abroad. So large, in fact, that the number of accompanying Italian journalists, almost 60, could well dwarf the Indian contingent covering the event.

On top of that, Italy is sending two presidents. One is the head of state and the other is the head of the Fiat empire, and it could be argued that the latter is the real Il Presidente. Despite its current financial problems, the auto maker is a huge conglomerate whose influence and muscle in Italian life is too vast to miss. Fiat is to Italy what GM was once to the US or what Nokia is now to Finland. But Luca Cordero di Montezemolo is much more than just its chairman; he is also an international figure who commands an iconic status in many circles. His long-standing stewardship of Ferrari, after the death of Enzo Ferrari, is still recalled with awe. He has reportedly turned down Silvio Berlusconis offer to become foreign minister, and now heads some of the most important public institutions in Italy, including Confindustria, Italys powerful business chamber which is bringing some of its top guns to India.

Bilateral trade between India and Italy has grown rapidly in the past few years, almost touching $3 billion last year, and Italian companies do not want to lose out on the early period of Indian growth. A delegation of this scale, size and composition from a major G-8 country would perhaps be inconceivable even five years ago. This is a reflection of Indias growing economic profile and the new level of seriousness with which India is discussed in global circles. Along with China, India is viewed seen as one the main drivers of future global growth.

While there are indeed many exaggerated expectations about India in western circles in fact, many Italian firms already in India routinely bemoan the absurdities of bureaucracy that stifle the investment environment the fact is that there is far more to the bilateral potential than meets the eye. First, being slow to move into China, Italy needs a foreign low-cost production base and a growing market to diversify its exports. According to a recent OECD study, Italian industry will continue to lose market share because of a combination of factors that reduce its competitiveness. These include high public debt, restive labour unions, a disproportionately strong euro and competition from low-cost economies like China. Italian exports, historically the driver of GDP growth, are forecast to fall by 6% over the next two years, and the domestic economy is not expected to grow beyond 2%. There is far more trade unionism and strikes in Italy than in almost any other G-20 nation.

Second, there is a natural fit in both structural and cultural aspects of business. Both countries have a rich layer of skills and expertise and tradition in areas like textiles, leather, and jewellery, except Italy has the recognisable brands and India has the cheap labour. The scenario begs for a variety of manufacturing and licensing arrangements for third country exports. Socially, both are hierarchical societies that revolve around tradition, personal relationships, a bit of organised chaos and disdain for government. Both have family-owned enterprises in large numbers, politically centrist traditions combined with a large bureaucracy, a vibrant and large press and robust cinematic industries that are the only two outside of Hollywood to have survived. And both countries have sharp regional disparities in terms of jobs, dynamism and prosperity. Of course one is East and one is West, but there are enough similarities to help Italian companies navigate through the complex business and social dynamics of India, much better than American, German or Japanese businesses.

Italian industry is typically known for its nimble and flexible nature, and for achieving remarkable success below the radar of public gaze. If the Parmalat crisis, which has eroded Italian self-confidence and image more than most people realise, is one end of the business spectrum in Italy, then the other end is those thousands of Italian medium-sized companies that have captured (and held for a long time now) huge, sometimes dominant, market shares in specialised areas, like eyeglass frames or furniture-making machinery or auto brakes. Most of us would not have heard of a single one of these companies, but they are extremely successful and reputed in their niche areas. One of the most dynamic, fastest-growing and richest regions in Europe today is north-eastern Italy.

The spinoff from the Italian delegation could also be social and political. Montezemolo, as head of Confindustria, wants to encourage a broad exchange of students, researchers and media, and sees the real magic in people to people contacts. There is no arguing with such a holistic goal.

The writer is editor, India Focus. The government of Italy and Confindustria sponsored the writers travel to Rome