Concrete actions to support Made in Italy

The XI Concluding Document of the Internationalization Steering Committee, released on Feb. 16, 2023 contains the guidelines of the initiatives that will also support professional cleaning SMEs committed to marketing Made in Italy in the world

Maurizio Pedrini Journalist and technical director of Dimensione Pulito

Reading with due attention the XI Concluding Document of the Steering Committee for Internationalization, released on February 16, 2023 by the Farnesina, many insights are also observed for the SMEs that represent the core of the Made in Italy industry in the professional cleaning sector. Today, it is precisely the Small and Medium Enterprises that are the backbone of the industry in the sector, which has a strong export vocation with about 50 percent of the value produced (turnover of 884 million euros) of the professional cleaning technology production exported in 2021 - referring exclusively to the machinery and equipment component - to the European market and those around the world. The CERVED survey published last year had drawn an extremely dynamic, competitive and confident picture of the industry, with about 40 percent of companies, especially the more structured ones, expressing expectations for growth in the post-pandemic period. Among the most strongly expressed critical issues: competition from international groups and rising prices of raw materials (16.6 percent of respondents), but also delays in logistics and complex issues related to other well-known difficulties of the national economy.

The international economic framework

Italian exports grow (+20.58%) but the world economy slows down in 2023. The Farnesina document dwells first of all on the international economic picture marked by the 2020 pandemic emergency; it has abruptly changed with the onset of the conflict in Ukraine. The main channel of transmission of the war's impact is commodities, whose prices on financial markets have soared, fueling an upward phase that has been underway since the second half of 2021. High inflation, rising commodity prices, difficulties in the supply of some inputs, bottlenecks in transportation and logistics, together with the restrictive stance of monetary policy in major countries and uncertainty about the evolution of the conflict in Ukraine are currently a major drag on the world economy, which is expected to slow down in 2023. The economic downturn has thus manifested itself in all supply chains. In this global scenario, even those economic sectors that have shown the best and most resilient performances in recent years have not been spared. Among them, in fact, those that have been most negatively impacted are tourism, or sectors related to it, such as air transport, especially with reference to the international segment. On the export front, in the period January-November 2022, compared to the first eleven months of the previous year, Italian exports marked a growth of 20.58 percent for a value of 573 billion euros and an increase also in volume, albeit small, of +0.3 percent. However, there is an even more pronounced increase in imports, up 39.5 percent to nearly 605 billion and 1 percent in volume. The sharp increase in imports is due to the rise in average unit values, driven particularly by the costs of energy and intermediate goods.

In fact, net of purchases of energy products, the increase in imports is reduced to 25.7 percent. Thus, the inflationary component, which has become crucial again in conditioning the evolution of the global economy, weighs on these figures. The more pronounced growth of imports than exports, determines in the first eleven months of the year, a trade balance deficit of -32 billion euros (compared to a surplus of +41.8 billion in the same period of 2021), to be charged mainly to the energy deficit of more than -102 billion (it was -40 billion in the period January-November 2021). On the other hand, net of the energy bill, there is a trade surplus of +70 billion compared to +83 billion in the first 11 months of 2021.

Italian exports

In comparison with its main European partners, the increase in Italian exports in the first ten months of 2022 (+20.8 percent) was higher than that of Germany (+14.4 percent) and France (+19.6 percent), while remaining slight- ly lower than that of Spain (+23.6 percent). Looking at trade balances over the same period, Italy has a deficit of -33 billion compared to Spain's deficit of around -62 billion, which is expected to continue in 2023 (+2.6 percent) and the following three years with an average of +3.6 percent per year.

As for forecast scenarios, Oxford Economics estimated world GDP growth of +3.0% in 2022 and +1.3% in 2023. As for international demand for goods and services in volume, it forecast a growth of +5.4% in 2022 and then slowed to +2.3% in 2023. According to Istat's latest forecasts, Italian GDP is expected to grow at a still strong pace in 2022, followed by a significant slowdown in 2023 (+0.4 percent). As for foreign trade, on the other hand, Istat forecast an increase in exports of goods and services of +10.8 percent and imports of +13.2 percent in 2022, while in 2023 the slowdown in world trade is expected to lead to a slowdown in both exports (+2 percent) and imports (+2.2 percent).

Slowdown in growth

Additional elements of uncertainty threaten to slow the growth potential of Made in Italy exports. For example, the latest "European Commission Report on the Application of EU Trade Agreements" dated October 11, 2022, shows that the majority of export barriers are determined by sanitary and phytosanitary measures (102 out of a total of 455 registered). The Italian agri-food sector is no stranger to the phenomenon, as there exist for our exports of some agri-food products to some strategically important markets, non-tariff barriers related to aspects of veterinary public health and plant health. With regard to Italian service exports, a full recovery to pre-Covid levels is expected in 2022 (thanks to a +34.8 percent increase) after only a partial recovery in 2021.

System actions

In 2023, the activity of public support for internationalization will devote renewed attention to the implementation of systemic actions, prioritizing the enhancement of specific production chains and reserving a special emphasis on the theme of circular economy and sustainability, a sector in which Italy is a leader with a rate of circular use of production inputs that has doubled in the last 10 years and is almost double the European average (ITA=21.6%; EU27=12.8% in 2020). This approach will make it possible to promote not only products, but an innovative paradigm of doing business, presenting our supply chains, not only as excellences on the international scene, but also as champions in sustainability, ecological and energy transition. "This action," the document highlights, "will make use, in addition to the usual and consolidated ICE promotional tools (organization of trade fairs abroad, incoming to Italy of foreign operators, communication actions and training courses), of the organization of 'missions for growth,' according to a differentiated approach by country, based on an overall assessment of the growth potential of Made in Italy in the different sectors where Italy expresses a high degree of competitiveness, with a particular focus on small and medium-sized enterprises." The circular economy is, in fact, a transversal theme that can be declined in every production sector and that, in the context of the promotional strategy that will be implemented, will privilege the supply chains of industrial technology, semi-finished products and raw materials, chemistry and life sciences, transport and logistics, agri-food and fashion and home-office furniture systems. The protection and valorization of Made in Italy are to be developed in an increasingly widespread manner, enhancing the typical Italian offerings. In this framework, in addition to the activities that are already carried out by the Ministry of Business and Made in Italy (MIMIT), with the direction of the Italian Patent and Trademark Office (UIBM), more specific activities are planned to assist companies to enable them to operate safely in foreign markets, guiding and protecting them on the side of industrial property and the promotion of typical products (in particular D.O.C., D.O.P., I.G.P. products) also in response to the phenomenon of Italian Sounding. "The experience of these years," Farnesina's work further emphasizes, "shows us how much SMEs underestimate the issue of trademark registration, on the one hand, and the Italian Sounding phenomenon, on the other, which also impacts the very competitiveness of the company."

The starting points for supporting our companies are those of the MIMIT incentives that have been consolidated over time also as a result of the positive feedback given by the companies themselves; these will be joined by:

• the one-stop shop, in charge of solving problems of any kind within the competence of the Public Administration for any type of business, which will have a dedicated and specialized declination for Made in Italy companies that intend to internationalize;

• a program to enhance Made in Italy, especially at the level of communication, including through forms of labeling of goods that make explicit their origin and upstream process (e.g. blockchain). The networks of offices that the Ministry of Foreign Affairs and International Cooperation (MAECI) - through its diplomatic and consular network, as well as thanks to the ICE network - will be able to support the entrepreneurial system will play a key role in this area.

The most desirable markets

Generally speaking, the internationalization support action in 2023 will be carried out in mature markets, i.e., the main markets for our exports, and in high-potential markets, i.e., in countries of special interest due to the co-presence of specific factors, such as high purchasing power, large number of Italian companies already present, favorable business climate, demographic weight and estimated margins of development of our exports. Finally, attention will also be paid to those emerging markets that are of specific interest in a medium to long-term perspective, due to significant growth potential signaled by greater openness to international trade and/or processes of social transformation and consumption patterns.

In this regard, the Document proposes an interesting distinction of the most "attractive" Markets. Included in the mature ones are: Germany, France, the United States, Switzerland, Spain, the United Kingdom, Japan, Australia, and Canada. On the other hand, those with high potential include: Poland, Czech Republic, India, Vietnam, Mexico, Brazil, Saudi Arabia, Turkey, Indonesia, Malaysia, Qatar, UAE, China, and South Korea. Finally, they belong to the emerging ones: Serbia, Kosovo, Morocco, Algeria, Kenya, Senegal, Nigeria, Ethiopia, Niger, Mauritania, Côte d'Ivoire, South Africa, Peru, Chile, Colombia, Central Asian countries (including Kazakhstan and Uzbekistan). In particular, support for our supply chains will be based on enhanced actions in areas of strategic interest to Italy, and will include broader socio-economic development objectives. These actions will cover the Balkan region, sub-Saharan Africa and Latin America, and will be complemented by increased efforts on the front of the search for opportunities arising from the procurement activities of Multilateral Development Banks and regional International Financial Institutions. The enhancement of innovation as a starting point for internationalization will also come through tools to facilitate access to credit, such as the Revolving Fund for Business Support and Research Investment (RIF), financed by MIMIT, CDP and the banking system, which supports companies with financial blending (with higher aid intensity in the case of research, development and innovation projects) and the basket bond for SME internationalization with cash collateral from MIMIT, with the objective of enabling SMEs to finance their growth plans abroad through the issuance of bond financial instruments. In the Western Balkans Region, the national strategy of renewed engagement launched at the January 24 National Conference on the Balkans will be deployed. In particular, a priority objective will be to strengthen the presence of domestic companies in the most high-tech sectors, such as infrastructure, digitalization and start-ups, renewable energy, green transition, agri-tech, in addition to those of traditional pres- ence of our country's companies (starting with textiles). As first operational follow-ups, bilateral economic partnership events will be organized in Serbia, Albania and Kosovo, respectively, giving priority to systemic interventions that are transnational in nature. On the African continent, the action will be part of the broader plan to promote a desirable "European Marshall Plan" that places priority on the promotion of investment, involvement of the private sector to initiate a process of sustainable development and reduction of poverty levels, as well as promotion within the EU of our own "Mattei Plan for Africa", as evoked by the Prime Minister, aimed at a virtuous model of collaboration and growth between the European Union and African countries and enhancing our strategic role in the Mediterranean. In this context, special attention will be paid to enhancing the initiatives put in place in favor of SMEs by the various member organizations of the Steering Committee.