Guide for entrepreneurs oriented to globalization

Delocalization. Perhaps one the most used, abused and then worn-out terms in economic ambit in the course of the last decade at least. And synonymous of an industrial policy that endless grief brought upon the national business. But not mandatorily fatal. Provided that we can tame and manage it.

«We are speaking of deindustrialization of the Country, those who have remained here are toiling and risk of closing down, those who can go away, attracted by the sirens of cross-border regions (today Savoy, Carinthia, Canton Ticino or Slovenia are much more attractive than Romania or China in the last decade) and those who are outside do not intend to come to us anymore. Last week Confindustria sounded the alarm on the foreign investments in Italy, dropped by 70 percent in 2012: multinationals do no set foot anymore» in the Country, «discouraged by the two many uncertainties» typical «of our system». It is the bad face of the past and present exodus of tricolour enterprises, described last July in an editorial on La Stampa of Turin. Not too distant from the Mole, in the Canavese area, in the course of an interview of another review of this same group, three standard small-medium enterprises gave different interpretations of the phenomenon. They are Esse B. M.; the mechanical prototyping workshop Jorio and TS Srl. «Delocalization has more affected low-end productions featuring lower value», they said, «flown to Asia while leaving here more complex job orders with questionable economic benefits. Other buyers have in time turned to Malaysia. The result? We are vulnerable to the price war and to enforce quality is difficult. Those who have delocalized, however, have often repented». But how La Stampa highlighted, the low cost, in the past typical of Asia manpower, has taken the form of more reasonable activity management burdens and of minor physical and mental labour to administrate them. And the manufacturing “Eldorado” is positioned just beyond the customs of Chiasso. In 2012 the Liguria entrepreneur Claudio Castellana moved his Modular to Mendrisio, where the labour cost is not inferior to the Italian one but balanced by a tax regime managed more rationally. Specialized in solutions for the setup of pieces on wire EDM machines, it operates in a structure that today houses other three Italian firms belonging to contiguous sectors. «Business conditions» said Castellana, «are important and the Swiss tax regime is particularly convenient. Laws are facilitating, while in Italy the taxation system is complex and bureaucratic. The Italian system is penalizing and the area where we operated, between Liguria and Piedmont, perhaps can rely on less diffused experiences in precision engineering. We felt isolated: in Switzerland we can find suppliers within few kilometres and trained personnel. And investing in capital goods is advantageous ».

Passage to North East

Part of our national entrepreneurs are searching for a passage to North-East, another looks at a much closer East than Beijing, beyond the ex-iron curtain: «The factors of the delocalization to East», said the general vice-secretary of the Trade Chambers of Central Europe (Accoa) Valerio G. Fratelli, «are the specialized training courses, the growth of the number of workers in constant training, the rise of home markets and a strengthening of institutions. It has waned», he said, «the idea of the specialization polarized between the high-competence production controlled by developed Countries and the low quality one for those of delocalization. The ex-socialist regions are more controllable than Far East or than Brazil, not negligible fact if processes concern SME not employing sufficient personnel to transfer a part of it to the production control». The SME travelling to East is a company with minimum 2.5 million Euros of turnover, headquartered in North Italy. The reasons for the move are different from the causes of the past. Labour is cheap, but it is «increasingly professionalized » and without mentioning the tax regime, «logistics and transports are gaining efficiency». «The example is Serbia», said Fratelli, «become delocalization shore of Italian companies, also thanks to incentives and economic contributions offered by the Government». But if the business migrates the fault is only ours: «Italy must face the structural causes of its decline», affirmed Fratelli, «boosting the business creation, lightening the tax burdens, capitalizing on tertiary knowledge needed for the global competition. Delocalizing may produce positive effects provided that in the Country from which you start they invest in innovation and development ».

The Third World no more exists

Similar the opinion of the general manager of NEWEXPLORA(  company established inside Cna of Modena to favour the internationalization policies of the territory, Stefano Colletta: «Quality mechanics», stated Colletta, «will always exist. But the globalization has opened the borders, has favoured the growth of unattended Countries and the third underdeveloped world, as we meant it here, has developed. It has purchased products, it is freeing itself from the mere trade and it will create simpler ones; it will soon realize also the most complex ones. It will be neither a simple process nor equal for all, and the Italian and European high-end production in mechanical ambit will need to be protected. But I do not think that it is simple to root it out from this area of the world». In the opinion of Colletta the Italian enterprise must chain its skin, suiting an evolving market. «We must be innovative», he said, «and preserve the capability of controlling some niches. But we have also to learn business organization models from abroad, for instance from Germany, for the labour-free time balance. And to enhance the industrialization level». Colletta talks about enterprises with the brain and the heart in the Peninsula; but low-cost and low-value activities moved elsewhere not pursuing an ephemeral economic advantage but looking for new horizons. Just looking at the economic account in the short term may be losing: «I have seen serious evaluation mistakes made to save irrelevant amounts, indeed», affirmed Colletta, «like for the takeover of run-down factories in Bulgaria that entrepreneurs intended to transform into sophisticated plants for packaging, in places with antiquate and scarce infrastructures. Germans have delocalized in the same Country but attentively choosing productive sites and personnel. Just to remind that the attention to price always makes you lose of sight the target of the value ».

Mum, I have lost the know how

The flaws of the Country-system do not help and the risk of losing know how increases but the top-level mechanical production has a future, recession and politics permitting. That’s why the made in Italy has a future is the theme and the title of a research that the Vicenza Associative Study Adacta has entrusted to the department of Economic and Business Sciences of the Padua University under the management of the professor Paolo Gubitta. The partner of Adacta Giacomo Cavalieri doubts the benefits of escaping abroad and notices: «In comparison with the internationalization, the delocalization has logics more limited to the incremental profit development. Well managed, it has allowed improving profits and investing gains in high added value activities, such as research, development, sales and marketing». There is a but: «The several damages produced», said Cavalieri, «derive from a delocalization managed in approximate way, replacing usual suppliers with others, Lcl (Low cost labour) ones, without investing in local subcontractors and partners, to deal then with the quality matter??. Strategies that undermine know how and organization of production chains, thus weakening the economic fabric». Improvisation did the rest: «The acquaintance», said Cavalieri, «with the regulatory references of a Country is not sufficient to operate in it. It is useful to know the socio-economic and political scenario; to rely on human resources suitable for the functions entrusted to them, ready to move in a far-off and different land ».

Off or near shore: essential is to be prepared

«In high added engineering», went on Cavalieri, «productions and employees are key elements. It is an industry difficult to delocalize. Besides, if we consider the historical Lcl of nations such as China, soon they will no more be LCL, low cost labour, at least for the key competences. I believe that the paradigm is not easily pursuable, at least in the medium term. For the productions characterized by lower added value, delocalization can have logic. The company must preserve not only the brain but also the key competences to control the production and to be ready to reposition again the productive activities in other and different Low cost labour, nations, and eventually to make them return to Italy. But», stated Cavalieri, «it is not only a matter of labour costs: it is necessary to understand whether the Country’s politics is still interested in attracting foreign investors or not. In some nations, due to clear dimensional reasons, enterprises must have a member on the territory, acquainted with the Country and the bureaucracy, with which to exchange some information on the national evolutions». The reflection must be meticulous both if you travel towards distant lands and in neighbouring nations. «Delocalization options, off shore or near shore, are typical of sophisticated realities. For SME», said Giacomo Cavalieri, «the off shore delocalization is complex; more accessible the near shore. It is a difficult decision: the off shore is appealing in terms of potential profit, but risky to be implemented. Delocalization must be evaluated in detail weighing the evolution of future scenarios: the know how lost today might be strategic in the future ».

The impact is strong, but Italy reduces losses

Considering companies with over 50 employees, an Istat research reported by Salvatore Canavò on Il Fatto Quotidiano last year calculated that from 2001 to 2006 about 3,000 enterprises, 13.4% of those of industry and services, started delocalization strategies. In the meantime a good portion of the domestic productive fabric went abroad looking for sale opportunities of the made in Italy. Industry (in 17.9% of cases) and services (6.8) have opened to Europe (55 companies out of 100); to China and to North America (16.8 and 9.7% respectively); to Southern Africa and to India (5% and 3.7%, in the order). The Italian investments in the last two areas grew from 2007 to 2009, as well as those directed outside the European Union in general. Il Fatto mentioned European restructuring monitor (Erm) according to which in the 27-EU (plus Norway) the Asian States weighed by 25% in the reorganization operations carried out by European Countries and 6.4% of the loss of arms in Italy is likely to be due just to delocalization, against 6.6% of France, 6.9% of Germany and 8.9% of Great Britain. The most struck industries are textile, shoes and garments, engineering and miscellaneous appliances, electrical engineering and cars. On Limes Enza Roberta Petrillo referred to the essay by Matteo Ferrazzi and Matteo Tacconi I go to East to say that from 2002 to 2010 only 10% of the «employment reduction is directly connected with delocalization. 25% depends on the business bankruptcy and 60%» even «on the corporate reorganization ». Petrillo has calculated as amounting to about 4,000 the companies headquartered beyond the Adriatic: «80% of the Italian enterprises that have undertaken the delocalization way have chosen Countries like Bulgaria, Poland, Romania and Hungary»; enterprises «that in the past were the skeleton of the industrial development based on the three C (1)– community, bell tower, shed – well described by Aldo Bonomi», obliged today «to reconfigure national expectations and global projects». Petrillo added: «Almost nobody comes back. The vast majority of Italian companies that choose displacing productive plants to East transfer the tangible and intangible capital of competence that has made the made in Italy great. At the beginning the economic policy of ex-Soviet Countries attracted investments by using the fiscal dumping, advantageous exchange rates, low social burdens and derogations in the application of ecologic regulations». And he ended: «In this perspective the Italy must face the structural causes of its decline, besides the delocalization. Some relevant themes: to boost the business creation, to lighten the tax burdens, to stake on the capitalization of the tertiary knowledge needed for the global competition. It is worth reminding that, on the other side of Adriatic, Kosovo, the newly-born State with battered finances and institutions, since 2009 has halved the single tax rate for businesses from 20% to 10%, against our domestic 31.4% tax».

(1) Translator’s note: in Italian these three words start with the letter “C”

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