In view of the increasingly intense competition between the economic markets in which businesses and highly qualified staff are established it is becoming increasingly important for a region to identify its competitive position in the international field in order to guarantee its future economic development. Regional benchmarking provides a tool specially adapted to this aim since it enables the comparison of different regions on the basis of various types of indicators. In this chapter, the regional economy of Veneto will be compared to that of Italy, Western Europe
(Note 2) and 12 other economically strong regions in order to define its competitive position on the international scale and to identify the weaknesses and strong points as well as possible risks and opportunities (SWOT Analysis).
It was specifically decided that benchmarking would be carried out using comparison parameters resulting among the most performing economies in Europe, as the potentiality of the Veneto region's economic structure is clear to all, and in order to transform those critical aspects into tools to work on and improve the competitiveness of Veneto in the world.
In the international field competitive is first and foremost a region which presents a positive economic trend (Performance), proves to be attractive in terms of business and human capital (Attractiveness) and is characterised by a modern economic structure (Structural Potential). The regional economic performance is evaluated by the GPD per capita indicators, growth in GPD and employment variation. The attractive capacity of a region is estimated by factors such as tax charge, accessibility, innovative activity and market regulation. Finally, combining information on the potential growth of the current sector composition (Industry Structure Potential), on the productivity of the sectors subjected to international competition (Capacity to Compete) and on the political scene (Political Structure Potential), the Structural Potential Index allows the potential future growth of the regional economy to be calculated. The current and potential international competitiveness of the Veneto region is evaluated on the basis of these three Bakbasel indices.
(Figure 9.1)
A large heterogeneity emerges from the international comparison, as concerns either the level of regional competitiveness or its composition in terms of strong and weak points.
The regional Performance of Veneto is on average sustained by a GPD per capita above the European average, but held back by an average GPD growth between 2000 and 2010 which is weaker compared to that of the other benchmark regions and of Western Europe.
The Attractiveness of the Veneto Region is in line with the Western European average and benefits from a good accessibility but is at the same time held back by a heavy tax charge like other Italian regions and by an excessive regulation of the goods market and a smaller production of university research when compared to that of the benchmark regions.
With regard to the Structural Potential Index, the results of the Italian regions are more critical as the low degree of administrative decentralisation impacts negatively on its making. However this does not affect the region's sphere of influence. Included amongst the factors which do however impact on a regional level is the composition of the Veneto export base. This is mainly made up of industrial sectors which show records of productivity below the Western European average as is the case in sectors which are heavily subjected to pricing competition with Countries that use low-cost workforce (for example, textile industry). On the other hand, these industries can become a good opportunity for Veneto if they are based on a high quality production which is incomparable to products originating from Countries with low-cost workforces.
Again from the point of view of the sectors, the mechatronics and metal section represents another potential opportunity for the region, since, even if productivity is shown to be below the European average (2010) it is confirmed again as one of the sectors with the highest growth potential in Western Europe. This is also a result of the high export flows it generates.
(Figure 9.2)
With reference to the opportunities which arise in Veneto for the future development of its regional economy, when observing the total results obtained in this international benchmarking, fundamental requirements such as investment in innovative activities, research and high level education are outlined in order to improve its attractiveness with regard to talents and businesses.
Analysing this comparison in more detail, Veneto emerges as an affluent region with a per capita income above both the Italian and European averages and with an average GDP growth which is more dynamic compared to that of Italy and to the majority of the peninsula's benchmark regions (in the period 2000-2010). The Veneto GPD which has been exclusively driven by the population growth over the last decade has experienced a decline moving into the new millennium, leaving behind the economic dynamism which characterised the Nineties and allowed this region to be included amongst the powerful industries of the age.
From then on Veneto's regional economy slowed its course if compared to the average Western European economic development, rising up during the first years of the 2000 and causing a gap in growth to open up whose signs are still evident today. The main reason for this gap seems to be the difference in productivity evolution which experienced a decline in Veneto over the last decade and consequently held the economic Performance back. However, in Western Europe a significant increase and important growth contribution was recorded.
The analysis of the innovative capacity of a region and the attractiveness it exerts on businesses and human capital, two factors which are closely linked, complete the image regarding the regional economic trend recorded in Veneto over the last ten years.
The 2010 Attractiveness Index highlights Veneto as less attractive from the production of university research point of view, calculated using the Shanghai index. It is also less attractive from the perspective of tax charge for legal and natural persons without taking into consideration the infrastructure and public service terms. Despite the fact that the Veneto Region can benefit from its strategic geographical position with respect to Europe and from its access to the sea in order to propose itself as an attractive location on a global scale, it is still difficult to reach on an intercontinental level and suffers from the absence of a metropolis of international acclaim which would help move the magnet of attraction. If the local talents and businesses are attracted elsewhere and the regional prospects abroad are weak in order to balance out emigration, there will be a lack in the innovation and productivity requirements. Moreover, the output of innovative activity, concerning both the density of patents and scientific publications, shows a shortage in this field even if it is increasing in comparison to the past.
Besides the innovative capacity, a sector composition in line with the growing international integration proves to be a fundamental element for guaranteeing a sustainable economic growth. A trend which leans towards a re-composition in favour of the tertiary sector is shown but the Veneto structure still reflects the historical industrial vocation of the region. On the basis of the current structural composition and of the growth potential calculated by single sections the economy of the Veneto region seems to have a potential below the Western European average. This must be brought back, on one hand, to an amount less than proportional with respect to the European average in the service sector, to which a large potential growth is attributed, and, on the other hand, to an importance above the industrial sector average (for example, traditional industry) for which the Western European development prospects are considered to be particularly scarce since they are in pricing competition with regions that use low-cost workforce. It must be considered, however, that whilst the majority of European manufacturing in traditional sectors is always more delocalised, the traditional handcraftsmanship and perfection features of the Veneto manufacturing places it within the medium-high level goods, well distinct from the low-cost manufacture produced in emerging Countries, and which is directed at clients who demand the taste and high quality of 'Made in Italy'.
(Note 3).
The Italian political context particularly contributes to the determination of the Structural Potential Index of the Veneto economy which is positioned below the Western European average. The political context is an obstacle to the potential growth of the regional economy, even if only marginally falling back into the single region's sphere of influence. In order to guarantee its long-term competitiveness, Veneto's priority is increasing its productivity. In particular, an increase in productivity would allow the region to take advantage of the opportunities offered by the mechatronics and metals sector, already important and consolidated in Veneto and for which a development of other systems is also expected in the future. Some favourable conditions are also recorded even in the tertiary sector, which in addition to showing a high potential growth records a particularly dynamic evolution for the last decade in the Veneto Region.
A development of exports in the service sector, today almost exclusively centred on local needs, could also compensate for the possible erosion of the Veneto export base, currently subjected to a heavy price competition.