Italian Industries that Are Attractive Abroad

Rather differently with respect to a century ago, when the foreign enemy had to be stopped at the Piave river, today it's Italy seeking the invasion of foreign capital and firms to make them work for the domestic economy, overcoming the notorious invisible barriers that make the Peninsula unattractive to "doing business". Severe data sources (e.g. Istat Inward FATS) point to the fact that Italian subsidiaries of foreign multinationals, are bigger, more productive, and create more high-education and highly-skilled jobs than comparable Italian corporations. Furthermore, they do more research, and are more apt at connecting and valorizing our high-specialization niches in the "global value chains".

Which are the Italian industries that are particularly sought by foreign investors?

Until a few years ago, foreign direct investment in Italy gravitated around industries where we had comparative disadvantage (electronics, office machines, telecommunications, the food industry), while they were largely absent in the industries where Italy typically enjoyed comparative advantage ("made in Italy" personal care and household goods, electrical instruments, mechanical engineering). All this had an underlying logic, favored by the creation of the European Single Market. But the acceleration in the globalization of (Europan and extra-European) markets has started to have to countervailing effects on the foreign front of investors: a) on the one hand, the growing interest of large and medium foreign groups for the acquisition of brands of excellence in the fashion and luxury industry (recently targeting Gucci, Bulgari, Loro Piana, Poltrona Frau), and for small and specialized mechanical suppliers put in financial distress by the post-2008 great crisis; b) on the other hand, a growing pressure to offshore existing plants outside Italy, under the framework of industrial reorganization and logistical rationalization (from Glaxo to Motorola, from Electrolux to Thyssen etc.).

But how should we evaluate our national convenience? Where should we look forward to attracting foreign interest?

Beware of prejudice: in the case of big made-in-Italy brands we should have no fear, but should rather be glad that foreign multinationals, which clearly have an interest in nurturing (rather than withering) those brands, in order to reap revenues and profits, can enlarge our financial heft and boost the global distribution of our creativity, by increasing the value of Italian luxury design (including "accessible luxury" and "beautiful and well made"), and by compensating the weaknesses of our firms, which excel at inventing and manufacturing quality, but are too small to manage an all-round internationalization.

In the case of small suppliers of machinery and a vast array of intermediate goods and components, which are typical elements in European and global chains of value, there exists the risk that the acquisitions of Italian engineering firms could be the prelude to reorganization by the newly controlling groups, with the end effect of shrinking rather than expanding local supply. But by and large, the opposite is true, as acquisitions more often than not strengthen of our manufacturing suppliers, who are well appreciated for their technology, flexibility and problem-solving abilities, but are undersized in organizational and financial terms. At least in the short termm, foreign capital inflows can prevent the worse damage of a complete market exit for these production units, extremely weakened by the sharp drop in domestic demand.

Certainly we should augur ourselves to become more attractive in those industries where Italy's potential lies unexpressed due to a dearth of capable and long-sighted entrepreneurship. We are thinking about hotels, tourism, and logistics; port infrastructures and other utilities that local administrations can find advantageous to privatize (while keeping in mind that these natural monopolies should be regulated in the consumer interest!), as well as banks and insurance companies, private equity funds, and venture capital. Value added in (real and financial) services is increasingly a fundamental ingredient of successful manufacturing.

Should we have a preference for the investors' countries of origin? Perhaps the US, Canada, Switzerland, Benelux countries, Denmark, Sweden, Persian Gulf countries: they tend to be less "nationalist" than our large European neighbors. I leave for a later occasion the outlook for growing Chinese direct investment, and, to a lesser degree, Indian direct investment into Italy.