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2 - Veneto on the international scene

Top  Foreign Trade

The process of progressive economic integration on a European and international scale involves not only large multinationals but also, systematically, small and medium-sized enterprises. The future of an open export economy such as that of Veneto, where small and medium-sized enterprises are the mainstay of the economic system, is therefore closely connected to the ability to successfully manage the process of internationalisation.
In 2007 there was a gradual slowdown of the growth rate of trade in manufactured goods worldwide. The increase in the international trade of manufactured goods was, at constant prices, around 8 percentage points and the growth hub remains firmly located in Asia: the steady recovery of most of south-east Asia is associated with China and India's increase in trade, due to the increasingly intense intra-regional productive integration.
The signs of a slowdown in the international economy, generated by the sub-prime mortgage crisis, which emerged in 2007, are expected to continue for most of 2008, leading to a further moderate decrease in world trade.
In 2007, despite the significant revaluation of the euro against the dollar and the consequent erosion of competitive prices, there was an 8% increase in Italian exports, confirming the positive trend of the previous year (+10.7%). The increase in exports, significantly higher than imports (+4.4%), led to a reduction of the negative trade balance, which is equal to -9.5 billion. The improvement resulted in a comeback of Italy's market share of international trade, from 3.4% to 3.6%, after some years of fluctuation.
The persistent burden of energy costs, almost 50 billion euros, and the increasing invasion of goods from China has contributed to the deficit in the trade balance. The trade deficit towards China exceeded 15 billion euros for the first time.
On a market level, exports towards the European Union, +6.1%, to Russia, +25.6%, to Latin America, +21.7%, to the Middle East +24%, and to China, +11%, continued to grow. On the other hand there was a noteworthy slowdown in sales towards the United States, -0.6%, and Japan, -3.2%, important trade channels for Italian-made luxury products.
The increase in the value of export markets has affected almost all the major product groups, in particular the mechanical industry, up +11.4% on 2006, metal products, + 13.2%, transport, +14.7%, and food, +5.5%. (Table 2.1) and (Table 2.2)
The increase in exports has affected all regions, with higher than national average increases for the islands, +15.7%, southern Italy, +9.9%, and for north-west Italy, +8.2%.
The top five regions in terms of shares of exports for 2007 were Lombardia, Veneto, Emilia Romagna, Piemonte and Toscana. Last year, exports for these regions increased by +8.6%, +2.7%, +11%, +5.9% and +6.9% respectively. (Table 2.3)
It is important to note that these are provisional data and that the Istat data on international trade were released at different times: the provisional data for the previous year are usually presented in March, while the definitive version is released in November. An analysis of these values over the years has revealed that the provisional data is always underestimated, especially for Veneto exports.
This forecast error is the price paid for the quick release of information, but for Veneto exports it has a particularly heavy effect compared to the other regions as Veneto is the second region for world trade and exports about 14% of Italian goods. The error has an effect on the provinces, above all on the Province of Vicenza where, in recent years, the major product groups (textiles, tannery, mechanical products, gold products) are considerably underestimated. (Table 2.4)
In 2006, following a +7.8% increase in Veneto exports, calculated according to provisional data, the publication of the definitive data showed that the effective increase was +13.9%. This difference of over 6 percentage points in monetary terms is an underestimate of almost 2 and a half billion euros, that is 5.3% of the total Veneto exports for 2006. The provisional data for Veneto is accountable for almost half of the national calculation errors. For Vicenza the difference between the provisional and definitive data is almost 1.7 billion euros and the variation for 2006 is 14.5 percentage points higher for the definitive data than for the provisional data.
As the definitive data for 2007 are not yet available, the figures for foreign trade published by Istat are accompanied by the percentage variation for 2007/06, calculated by comparing the two sets of provisional data, to provide a more accurate forecast of the trend for regional international trade. From now on the analysis will be carried out on the provisional data.
Therefore by comparing the two sets of provisional data, the annual increase of Veneto exports would go up to +8.4 percentage points, a figure that almost corresponds to the national average of +9.7%. (Figure 2.1)
Germany is confirmed as the first market for Veneto exports, with a share of almost 13% of the region's exports and an annual increase that should be just over 10 percentage points (calculated by comparing sets of provisional data). France and the United States are the second and third recipient markets for Veneto goods showing, however, different trends. Exports to France should show an increase of around 10 percentage points, whilst sales to the United States are expected to decrease by between 2 and 3 percent. Exports to Russia continue to soar, with increase rates close to 30 percentage points for 2007.
Exports to China show a considerable increase, +15%, and have reached 879 million euros. Exports of machinery, +15.6%, leather, +30.3%, electronic-optical equipment, +12%, have increased, and exports of metal products have almost doubled, reaching around 74 million euros last year.
There has been a consistent fall in exports to Romania, down 14%, caused by a strong reduction in exports from the fashion sector. (Figure 2.2)
There has been an increase in value of exports for the three main sectors.
The machinery industry is still the top exporter in Veneto. This sector is responsible for 22% of the total exports for the region, and for the second year running there could be an increase of over 10 percentage points in the turnover for the export of machinery.
The second sector for exports from the region is that of metal products, worth almost 12% of the entire export turnover. In recent years there have been considerable increases in exports for the sector, +91.8% in the last five years. In 2007 the growth rate should be at least 15%.
Optical and electronic equipment make up the third sector for Veneto exports, with a regional share of 11.3%. In 2007 exports for the sector should increase by about 10%, confirming the positive trend of recent years: +50.8% for 2007/03.
The increase in exports of means of transport, which go up by around 30% a year, is due to the positive balance of the naval sector, up 440 million euros on 2006.
Finally, there has been a slight fall in exports for the fashion industry (textiles, clothing and leather), which mainly affects the tanning industry. (Figure 2.3)
In 2007 the trade balance recorded a profit of around 10 billion euros. This is mainly due to positive balances with the EU (about €4.7 billion) and North America (+€2.9 billion). The trade surplus with Eastern European Countries and the Middle East is also over a billion euros. In contrast, the geographical areas with which there have been trade deficits are East Asia (over 2 billion euros) and North Africa (almost 600 million euro).
In 2007 the increase in imports at current prices was approximately 6 percentage points. The increase in Veneto imports is mainly due to goods from East Asia and, in particular, from China. In 2007 the value of imports from China exceeded the three billion euro threshold for the first time, with an increase of more than 20 percentage points. Imports from the Far East also show an extremely positive trend for all the sectors, with very high increases for the fashion industry, machinery and optical-electronic equipment.
Imports from the EU have also increased and Germany is still Veneto's main trade partner with a share of 23% of the total imports for the region. Of the main supply markets, there has been a decrease in imports from Romania, caused by the considerable reduction of supplies in the fashion industry. (Table 2.5)
In 2007 there was an increase in the value of exported goods for all the Veneto provinces.
There was a 10 percentage point increase for Belluno and Venezia, for the latter this is due to the steady increase in export turnover for the shipping sector.
There was a 6 percentage point increase for Treviso, which alone accounts for almost 21% of the region's exports.
The increase in turnover for Venezia and Rovigo is almost 5 percentage points.
The growth for Padova, which has a stable share of 15% of the region's exports, has slowed down slightly, from a rate of +11% for 2006 to +7.7% for 2007.
The province of Vicenza, which alone accounts for about 30% of the region's exports, should show an increase in exports of almost 10 percentage points. The forecast is based on the comparison of provisional data for the last two years which, as is mentioned above, gives a more reliable estimate than that provided by Istat, -3.6%.

Top  Focus on China

The People's Republic of China is the country with the highest number of inhabitants (1.3 billion) in the world. China covers a vast area (9,596,960kmē) and the road network extends for a total of 1.87 million km, running mainly along the coast, and 34,300km of which are high speed. The rail network extends for 73,100km, of which 23,700 are multi-track and 18,500km electric. As far as shipping is concerned, during the construction of ports the container system has recently been optimised. All the major ports (Hong Kong, Shanghai, Shenzhen, Qingdao, Tianjin, Guangzhou, Xiamen, Ningbo, Dalian) are among the 50 top container-ports in the world, where as much as 100 million tonnes of goods transit every year.Hong Kong, Shanghai, Shenzhen, Qingdao, Tianjin, Guangzhou, Xiamen, Ningbo, Dalian) are among the 50 top container-ports in the world, where over 100 million tonnes of goods are transported every year. (Table 2.6)
According to IMF estimates, in 2007 China's GDP reached 3,251 billion dollars and its value per capita, expressed in purchasing power standards, was slightly higher than 6,990 dollars. According to figures from the World Bank, from 1994 to 2006 the average annual growth rate of GDP in China was 8.5%. Last year the Chinese GDP increased by 11.4 percentage points, a rate which should remain stable, between 9 and 11% a year, even over the next 5 years. In 2007 internal demand increased sharply and, for the first time in seven years, the contribution of expenditure exceeded that of investments (4.5 points against 4.2), showing the current transformation in the economic structure and consumer habits of the Chinese. Over the last decade, China has attracted industries in search of cheap labour, thereby becoming the planet's workshop. What is more, China joining the WTO in December 2001 was a turning point for China's trade policy. According to the latest estimates, China should overtake the United States by the end of 2007, behind Germany at the top of the world's leading exporters. Between 1997 and 2006, the exports of goods from China went up from 183 to over 969 billion dollars, continuing to increase the rapid pace and taking China's share of the export market from 3.3% to 8.1%. The export structure has rapidly evolved towards products with a higher technology content and, in general, towards areas showing major growth in international trade. The specialization followed a process analogous to that of other economies in the area, starting with traditional products and then rapidly moving into electronics and ICT.
In recent years, China has been one of the countries with the most dynamic trends in the import of products. In 2006, with a share of 6.4%, it came third in the rankings of world importers and the value of its imports showed a growth rate of around 19 percentage points compared to 2005. A slight slowdown in the growth rate of Chinese imports is expected for 2007 which, however, should not be less than 10 percentage points. These details show the importance of becoming trade partners with China and the relevance of the new opportunities offered by the Chinese market, even for medium-high level products.
Veneto's provisional foreign trade figures for 2007 have highlighted an annual growth in exports at current prices of +15.4%, for a total of 879 billion euros. Imports from China are also constantly rising. In 2007 the value of the acquisition of Chinese goods exceeded 3.3 billion euros, +22.1% in a year, causing a trade deficit of almost 2.5 billion euros. (Figure 2.4) and (Figure 2.5)
The three economic sectors leading regional exports towards China show a positive trend. In fact machinery, +15.6%, optical and electronic equipment, +12%, tanning, +30.3%, have strengthened their position in total exports. More than 60% of sales in China are of these products. The value of exports of metal products has also gone up from 37.6 million euros for 2006 to 73.6 million euros for 2007.
The positive trend for imports from China has affected all the major economic sectors, with steady increases for textile and clothing products, +16.1%, optical and electronic equipment, +18.1%, machinery, +25.6%, and tannery products, +12.1%. The value of imported metal products has doubled from 188 million in 2006 to 380 million in 2007. In 2007 the value of imports for these five sectors makes up more than 80% of the total imports in Veneto from China. (Table 2.7)
The Chinese community certainly makes up the most deeply rooted group of foreign entrepreneurs in Veneto. Of all the foreign entrepreneurs in Veneto, by 31.12.2007 the Chinese were in second place, 9.4% of the total number, after the Swiss. Over the last seven years, the number of Chinese entrepreneurs in Veneto has risen from 930 in 2000 to 4,210 in 2007.
The highest number of Chinese entrepreneurs is registered in the manufactured goods sector: 1,957, i.e. 46.5% of the total. In particular they specialise in leather work (1,464 entrepreneurs) and textiles and clothing (149).
A significant number work in the commerce (1,283 or 30.5% of the total) and restaurant (833 or 19.8% of the total) sectors.

Top  Competitive features of internationalisation

(Note 1) One of the distinguishing features of globalisation is the internationalisation of enterprises through foreign direct investments (FDI) and other forms of non-trade internationalisation. This phenomenon has become increasingly relevant since the second half of the 1980s. In the last three decades of the last century, favoured by a series of economic, technological and social factors, the growth rates of FDIs have remained notably higher than those for the world gross product and for exports. This has contributed to the emergence of a new economic geography, in which emerging countries are taking on an unexpected role.
This is why since last year the Statistical Report has introduced a new section dedicated to internationalisation through foreign direct investment (Note 2).
The international context
On an international level, over recent years there has been a new, strong recovery of world flows of FDI, following the extraordinary growth in the 1990s and the sharp drop at the beginning of the millennium. According to UNCTAD's recent estimates (Note 3), in 2007 the world flows of FDI reached 1.5 billion dollars, surpassing the record of 1.4 billion reached in 2000. The increase in the FDI flows was particularly notable in the last three years, 2005, 2006 and 2007. The outlook for 2008, however, is not so favourable. This can be seen in the negative trend in mergers and acquisitions (M&A), which make up a significant portion of FDIs. It can also be seen in the fall, in the second half of 2007, in value of deals consolidated on an international level.
It should be emphasised that as well as M&As, FDIs also include the expansion of existing businesses and greenfield investments (Note 4), which have differing effects on the international relocation of businesses. M&As bring about a change in ownership of international production, but they do not modify territorial distribution. New foreign investments (expansions and greenfield investments), however, do modify this aspect, as do domestic investments within each country.
The model of Italian firms' growth abroad mainly involves offshoring to nearby countries of Central and Eastern Europe and an effort to enter the markets of developed and rich countries which can appreciate the quality and design of Italian-made products. However, this model is too weak to guarantee the flow of investments to those parts of the world which are currently the target of large-scale industrial projects and international investors. Recently Italian firms have initiated more projects in Asia than in the past. However, the extent of this remains modest if compared on an international level. Italy is also experiencing difficulties in international integration as regards inflows. Italy's profile is relatively weak compared with European standards, although Europe is a continent which is itself losing popularity as a destination for new investment flows. Italy is not seen as a particularly attractive destination for greenfield projects, particularly in comparison to other European countries with both traditional and emerging markets (above all Spain).
Studies promoted by ICE on the internationalisation of Italian businesses do not show a positive trend for multinational integration at the beginning of the new millennium. As concerns outgoing investments, there has been a slowdown of new projects, despite the dynamism shown by SMEs and medium-sized industrial groups. This has primarily been caused by our large companies' problems. There has been an increase in recent years which was consolidated in 2007. There are still no precise results for 2007, but the signs are positive.
Italy's SMEs have started to actively take up activity abroad again, but this is inevitably limited to small-scale investments. Moreover, an internationalisation model based on small enterprises is intrinsically weak. Although these small companies often boast greater competence, as well as better exchange of experience and knowledge than the same sized companies in other countries, thanks to territorial agglomeration, they cannot fail to suffer from the constraints that small companies all over the world share in terms of financial and managerial resources and the ability to access and accumulate "firsthand" experience and information of international markets.
Foreign-invested enterprises in Veneto
At the beginning of 2007, there were 510 foreign-invested Veneto enterprises with 44,362 employees. In 2006 their total turnover amounted to 21,666 million euros (Note 5). The controlling interests are mainly equal or minor, regarding 88,6% of the foreign-invested enterprises (which rises to 92% and 93% if measured in terms of number of employees and total turnover respectively). These figures seem to be in line with those on a national level, where the share of controlling interests amounts to 92.1% of the foreign-invested enterprises, 91.1% of employees and 89% of turnover. (Table 2.8)
Veneto accounts for 7.1% of Italy's foreign-invested companies, 5.2% of their employees and 5% of their turnover. The region's share of MNE invested activity in Italy is therefore weaker than that of other economic variables (Note 6).
In comparison with the other northern regions, Veneto's performance as regards the presence of foreign MNEs in the region is relatively modest (fig. 2.13). The level of incoming internationalisation, worked out by the ratio of the number of persons employed by foreign-invested enterprises to the number of persons employed by resident enterprises, is 5.3% for all of the sectors in the Reprint database (compared with a national average which is more than double this, namely 10.7%) and 5.8% (compared with 12.9%) if we take into account only the manufacturing industry. (Figure 2.6) and (Table 2.9)
It should be highlighted that in recent years, the number of foreign-invested companies in Veneto has risen, even though the popularity of Italy with foreign investors is low. In 2001-2007 the number of foreign-invested companies with headquarters in Veneto rose by 16.2% compared to a 1.6% national increase. In the same period the number of employees in foreign-invested companies in Veneto rose by 0.7%, while on a national level there was a 6.1% drop. In the manufacturing industry, the number of foreign-invested companies increased by 6.6% in Veneto, compared to a 3.7% reduction on a national level. There was a negative trend, however, for employment by foreign-invested companies, for which there was an 11.9% drop during this period. This result was better than the national figure (-17.9%). (Table 2.10)
An interesting international comparison at a regional level can be carried out with reference to foreign greenfield investment projects or those aimed at expanding existing enterprises (excluding therefore M&As), using the information from OcoMonitorTM which allows this level of unbundling of the analysis. There seems to be a rather wide gap with respect to the attractiveness of the strongest European regions; Lombardia is the only Italian region which can compete with them. A comparison with other Italian regions is more balanced. Piemonte and Lazio come after Lombardia in terms of attractiveness to foreign investors; Veneto comes fourth, overtaking Toscana and Emilia-Romagna (which, however comes above Veneto in terms of number and economic importance of active foreign-invested enterprises in its territory). Veneto's capacity for attracting 'valuable' investments (research and development, headquarters, manufacturing enterprises), however, seems limited. This is especially the case when compared with the region's competitors and the North-West (Lombardia and Piemonte).
With reference to the information from the Reprint database, the analysis of the structural features of foreign-invested companies gives a clear outline of the foreign multinational firms in the region. If business sectors are considered, the manufacturing industry clearly has a higher number of foreign-invested companies and greater economic importance (227 companies with 31,877 employees, equal to 71.9% of the total number of employees in foreign-invested companies). This is followed by wholesale trade (184 companies and 5,741 employees) and professional services (37 firms and 3,632 employees). The overall share of foreign capital in the other sectors in the database is somewhat modest: logistics and transport (26 firms and 898 employees), information and telecommunications services (18 firms and 1,488 employees), energy and construction (17 firms and 638 employees), mining (1 firm with 88 employees). (Figure 2.7)
In the manufacturing industry, a more detailed analysis shows how the foreign-invested companies in Veneto are mainly in the machinery industry. There are also a number in electrical products, electronic and optical equipment and the chemical and pharmaceutical industry. Compared to the national average, foreign-invested enterprises in Veneto seem to be specialised in sectors with intermediate technological intensity (particularly mechanics, metal and metal products, rubber and plastic goods) but not in sectors with low technological intensity (except for leather and shoes for which Veneto is highly specialised). (Figure 2.8)
Three quarters of the foreign-invested companies in Veneto are partly owned by multinationals of European origin (382 companies, with over 34,000 employees). There are 86 Veneto companies with North American capital, with 6,780 employees, while there are 22 with Japanese investments, with just under 2,000 employees. There are 16 Asian companies, two from South Africa, one from New Zealand and one from Venzuela. Germany has invested in the highest number of enterprises in Veneto (119), followed by the United States, France, Great Britain, Switzerland and the Netherlands. Japan comes seventh, ranking above another six European countries: Belgium, Sweden, Austria, Spain, Denmark, and Finland. If we look in terms of the number of employees in foreign-invested enterprises, Germany comes just before Great Britain (7,670 compared to 7,663), ahead of the United States, France, the Netherlands, Sweden, Switzerland and Japan. The presence of emerging countries in Italy has increased in recent years, just as in other developed countries. In particular, at the beginning of 2007 in Veneto there were already four Indian companies, three Chinese, two Russian and two Romanian. (Figure 2.9) and (Table 2.11)
Verona is the Veneto province with the highest number of foreign-invested enterprises (152). This is followed by Padova, Vicenza, Treviso, Venezia, Belluno and Rovigo. If we look in terms of employment Verona once again comes in first place, with 13,095 persons employed by foreign-invested enterprises, accounting for 29.5% of the regional total; Vicenza (9,500 employees) is followed by Padova (8,104), Treviso, Venezia, Belluno and Rovigo. In terms of trends, between 01.01.2001 and 01.01.2007 the number of persons employed by foreign-invested companies in the province of Verona increased by 1,237 (+10.4%), compared to 851 more employees in Padova (+11.7%) and 598 in Vicenza (+6.7%). The increases for the provinces of Rovigo (63 employees, +4.5%) and Treviso (11 employees, +0.2%) were lower. The number of employees actually dropped in the province of Belluno (-420 employees, -15.9%) and especially Venezia (-2,037, -37.6%).
Internationalisation of Veneto firms
At the beginning of 2007 the Reprint database contained 1,014 multinational Veneto enterprises, i.e. Veneto firms that were not foreign-controlled and which on that date held shares in at least one foreign enterprise working in the sectors included in the database. There is a total of 2,977 of Veneto-invested firms in the considered sectors, with 137,149 employees and a turnover of 25,571 million euros for 2006 (Note 7). The controlling interests concern 81.5% of the firms, equal to 78.7% in terms of the number of employees abroad and 84% in terms of turnover (Note 8). (Table 2.12)
As regards the overall share of Italian investments abroad, Veneto holds 18.1 % of Italian multinationals, 14.2% of foreign-invested enterprises, 11.1% of employees and 6.4% of turnover. Veneto is second only to Lombardia per number of enterprises with investments in foreign companies and number of related undertakings abroad. It is in third place (behind Piemonte) per number of employees abroad, and in fourth place (behind Lazio) for turnover.
As regards controlling interests, Veneto's share rises to 14.7% of enterprises, 12% of employees and 7.9% of turnover. These data reveal how Veneto's share of investors and shareholding abroad is higher than its total economic contribution on a national level. But if we consider the contribution of shareholding abroad, particularly if measured in terms of turnover, the quota goes down. This is due to the higher number of projects which mainly involve relocating certain phases of the manufacturing process abroad, as confirmed by the analyses which follow regarding foreign shareholding abroad by sector of activity and geographic destination. (Table 2.13)
However, an analysis based on an enterprise's direct foreign investments only covers a part, albeit a major strategic part, of a wide variety of non-equity agreements (Note 9) which enterprises use to boost their involvement abroad. Indeed, this analysis excludes 'lightweight' internationalisation based on agreements and partnerships with foreign enterprises that do not involve exchanging shares. This is undoubtedly an important form of internationalisation for Italian enterprises, and for Veneto enterprises in particular, both so that part of production can be decentralised to countries with lower labour costs and so that distribution channels on the outlet markets can be accessed. As regards relocating production, various studies have shown how "outward processing traffic" (OPT), a specific customs regime that facilitates temporary exports of primary or semi-worked materials to be directly worked on in other countries and then re-imported to their original territory, is only partly accounted for by transactions between firms belonging to the same multinational group, while transactions between independent firms are more common.
Another important phenomenon, in particular for Veneto, regards Italian entrepreneurship abroad, i.e. private Italian citizens with foreign-invested enterprises which do not count as part of Italy's multinational businesses. Such enterprises are mainly ones in which Italian industry is traditionally competitive. As regards Veneto, this phenomenon is particularly important in Central and Eastern Europe. In some countries, and especially in Romania, the percentage of businesses run by Italian citizens exceeds that of Italy's foreign-invested enterprises. There are several main actors in these processes: entrepreneurs who have never had or who abandoned previous activities in Italy, but also families and employees of entrepreneurs operating in the country. That "grey area" where formal and informal cooperative links have been established between new Italian entrepreneurs and firms that have relocated phases and goods and constructed a network of international production, has thus expanded. In some instances these are highly pervasive processes, but they do not necessarily lead to the birth of multinational enterprises both because they do not have the formal ownership structures which integrate the activity, and because at times the relations of ownership are replaced by family ties (Note 10).
It is possible to compare the performance of internationalisation in Veneto with that of the other regions in Italy, comparing for each the number of employees in the enterprises abroad with the number of employees in non-foreign-invested resident enterprises (Note 11). Not surprisingly, this indicator of the degree of internationalisation is higher for Piemonte and Lombardia, regions with the biggest, most internationalised Italian enterprises. (Figure 2.10)
Veneto, with 17.4 employees abroad per every 100 employed in Italy, comes just above the national average (17.2%), preceded even by Marche and Emilia-Romagna. The structural characteristics of the regional economy, with its clearly low-medium technological intensity of production, which is intrinsically less inclined towards internationalisation through FDI, is in part responsible for this performance, as are the opportunities for relocation offered by the dense network of Veneto entrepreneurs who have set up business activity in Eastern European countries, a valid alternative to firms' direct investment.
Nevertheless, the first few years of 2000 saw the investment of Veneto firms in foreign enterprises grow at a higher rate than the national average. Between the beginning of 2001 and the beginning of 2007 the number of Veneto investments in foreign enterprises grew by 35.1%, compared with +25.8% on a national level; the increase in the number of employed persons abroad saw an 37.8% increase (compared with the national 4.6%), while the turnover generated by foreign investments grew by 65.1% (compared with 41%). If we look only at manufacturing, the number of persons employed by foreign firms with Veneto investments has grown by 35.4%, while on a national level growth has been 2.9%.
Well over half of the enterprises abroad with Veneto shareholding carry out mainly commercial activities and post-sale assistance. There are 1,766 companies with over 30,000 employees and a turnover of 12.5 billion euros. In most cases they are marketing subsidiaries of enterprises in the manufacturing sector. Over three quarters of the employees abroad work for enterprises that carry out productive activities. The 968 foreign manufacturing enterprises with investments by Veneto multinationals employ 103,000 workers and in 2006 had a turnover of over 12.2 billion euros. The presence of Veneto multinationals in other sectors, however, particularly the tertiary sectors, is marginal.
Compared to the national average, Veneto investments in foreign enterprises are highly specialised in the low technology products. This is particularly notable in the typically 'Italian-made' sectors such as clothing and textiles, and leather and footwear, which have 37,000 and over 14,000 employees respectively, not to mention the other manufacturing industries, including two other highly specialised sectors in the region - furniture and gold products. Figures for wholesale trade are also above national average, with the metal work sector (over 16,500 employees abroad working in metal, metal products and mechanical equipment and machinery) and the electrical and optical equipment and machinery (around 13,800 employees, especially for the Belluno glasses industry) are particularly noteworthy. (Figure 2.11)
As concerns the geographic trends of Veneto enterprises with foreign direct investments, almost two thirds and 70% of their employees are located in Europe. In particular, 1,021 enterprises with Veneto investments, with around 45,500 employees, are situated in the member states of EU15. There are 721 enterprises with Veneto investments, with almost 46,300 employees, in Central and Eastern Europe, while there are 87 enterprises, with just over 2,600 employees in other European countries. These are followed by Asia (around 16,000 employees in just under 500 enterprises with investments by Veneto multinationals), North America (almost 8,500 employees in over 300 enterprises), Latin America (over 5,500 employees in just under 200 enterprises), Africa (almost 12,000 employees in 136 enterprises) and Oceania (455 employees in 38 enterprises). (Figure 2.12)
Compared with the national average, Veneto firms seem more inclined to invest in countries in Central and Eastern Europe, North Africa and Central Asia. However, in comparison with the national average, the direct presence of Veneto firms in the Americas, the Middle East and Oceania is somewhat modest. The correlation between the sector specialisations and the geographical choices is evident and indicates the significance of choices related to the reduction of labour costs as a determining factor in the Veneto enterprises' choice of foreign investment. (Table 2.14)
The province with the highest number of investing firms is Vicenza (277), followed by Treviso, Padova, Verona, Venezia, Belluno and Rovigo. If we look at the contribution of activity abroad in terms of number of persons employed however, Treviso comes first, with 31,227 employees, ahead of Vicenza, Padova, Verona, Belluno, Venezia and Rovigo. Considering the most recent investments, in 2006 the most significant cross-border acquisitions by Veneto enterprises were in the metal sector and the other manufacturing industries.



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Notes

  1. Edited by Marco Mutinelli, University of Brescia
  2. This contribution is mainly based on data retrieved from the Reprint-database, which has been developed by the Politecnico di Milano in the course of its research on the internationalisation of Italian businesses through FDI, commissioned by the Foreign Trade Institute. The database analyses the industrial system and the real services supporting industrial activity in certain sectors. It counts the number of investments by Italian enterprises abroad and foreign investments in Italy, taking account of the number of enterprises, the economic strength and geographical as well as structural factors. The database covers the following sectors: mining and manufacturing, energy, gas, water, building, wholesale commerce, logistics and transport, telecommunications, software and computing services, other professional services.2 Information retrieved from the Reprint database regards of internationalisation through equity investment, including majority and minority shareholding of subsidiaries, branch offices, affiliates, joint ventures, cross-shareholdings to support strategic alliances. The database is thus not limited to foreign direct investment flows since, as is well known, only some of these international operations, however important they may be, are financed through movements recorded in balances of payments. This is because it is possible to obtain supplementary financial resources on the markets of destination.
  3. United Nations Conference on Trade and Development.
  4. These consist in the creation ex novo of production.
  5. Enterprises that have localised their headquarters to Veneto are also considered to be Veneto enterprises. Headquarters means where an enterprise has its general management and administration, regardless of where the enterprise has its registered office.
  6. In terms of employment, according to Istat's 2001 census the Veneto accounted for 11.2% of Italy's total number of people employed in the sectors taken into consideration by the Reprint database. In terms of export, in 2007 the contribution of Veneto compared to the national total was 13.3%.
  7. It is important to highlight how a survey of the small and medium-sized Italian enterprises, focussing on 'successful' firms, has allowed the most recent version of the Reprint database to identify a relatively high number of 'small Italian multinationals', whose international activities were not recorded in previous surveys. Veneto, thanks to its industrial structure and the importance of small and medium-sized enterprises, benefits from this improvement in the database. It can be seen how its national position has improved compared to that outlined in the previous report, as the more attentive reader will have noted.
  8. Many investments in the form of equal or minority interest in a company are joint-ventures in countries where labour costs are low (mainly in Eastern Europe).
  9. Without investing in risk capital.
  10. The extent of this phenomenon is shown by comparing figures from the Reprint database and the results of a survey on Veneto enterprises in Romania promoted by Antenna Veneto Romania. The overall number of Veneto enterprises that registered in Romania from 1990 to March 2005 is 2,578 units. These enterprises employ more than 39,000 people, and in 2003 they recorded a turnover of about 458 million euro. The Reprint-database shows that in 2007 Veneto enterprises invested in 215 Romanian businesses, with more than 18,600 employees and a turnover of ca. 514 million euros (in 2006). Le imprese romene partecipate da imprese venete censite dalla banca dati Reprint ad inizio 2007 215, con oltre 18.600 dipendenti e un giro d'affari (riferito al 2006) di circa 514 milioni di euro. Regarding direct investments by private individuals, taking into account that the data for turnover is three years old, enterprise participations are clearly medium-size and have high productivity.
  11. The reason why employed persons in foreign-controlled enterprises have been excluded from the index is because foreign controlled enterprises based in Italy do not take part in the active multinationalisation process. If they do control activity abroad, this is generally due to organisational and ownership choices of the MNEs they belong to, and it would be misleading to attribute control of their assets to Italy. This is why these activities are not taken into consideration in the calculation of Italian-invested enterprises abroad. Obviously the calculation only includes the activities registered in the Reprint database.


Table 2.1
Exports per region: Values expressed in millions of euros and annual % variation. Years 2006:2007
Table 2.2
Imports per region: Values expressed in millions of euros and annual % variation. Years 2006:2007
Table 2.3
Exports per region. Difference between provisional and definitive annual % variation. Years 2002:2007
Table 2.4
Exports per province. Provisional and definite annual % variation. Years 2002:2007
Figure 2.1
Percentage of Veneto exports for the main markets - Year 2007
Figure 2.2
Percentage of Veneto exports for the main markets - Year 2007
Figure 2.3
Trade balance for Veneto by geographic region in millions of euros. Year 2007
Table 2.5
Exports per province: Values expressed in millions of euros and annual % variation. Years 2006:2007
Table 2.6
Economic Indicators for China - Years 2000:2007
Figure 2.4
Percentage of Veneto exports to China for the main markets - Year 2007
Figure 2.5
Percentage of Veneto imports from China for the main markets - Year 2007
Table 2.7
Chinese entrepreneurs per economic sector. Veneto. Year 2007
Table 2.8
Indicators regarding foreign-invested enterprises on 01.01.07 - Veneto and Italy.
Figure 2.6
Degree of passive internationalisation by region on 01.01.07.
Table 2.9
Number of enterprises, employees and amount of turnover of foreign multinationals in Veneto against national total - Years 2001:2007
Table 2.10
Number of cross-border greenfield investment projects and expansion of activities, by selected Italian and European regions of destination, January 2003 - February 2008.
Figure 2.7
Percentage of employees in foreign-invested Veneto companies per economic sector on 01.01.2007
Figure 2.8
Specialisation index of foreign-invested enterprises in Veneto by main economic sectors on 01.01.07
Figure 2.9
Percentage of employees in foreign-invested Veneto companies per geographic origin 01.01.2007
Table 2.11
Foreign-invested Veneto enterprises on 01.01.07, by province
Table 2.12
Indicators regarding the investment of firms in foreign enterprises on 01.01.07 - Veneto and Italy.
Table 2.13
Number, employees and turnover of foreign enterprises with Veneto investments against national total - Years 2001:2007
Figure 2.10
Degree of active internationalisation by region on 01.01.07.
Figure 2.11
Specialisation index of Veneto investments in foreign enterprises by main economic sectors on 01.01.07
Figure 2.12
Percentage of employees in foreign companies with Veneto investment per economic sector 01.01.2007
Table 2.14
Veneto enterprises with foreign investments on 01.01.07, by province
Chapter 2 in figures
Chapter 2 in figures

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