a) Assessment of commercial penetration of Italian products in the domestic market
Italy has an intense presence in the commerce sector, however, has to confront also the competition of the emerged countries as far as quantity level as well as middle-low prices of the commodities are concerned.
Italy has conquered quotas in the market of capital goods (machines for the processing of wood, plastic goods and food packaging materials). These sectors place Italy in the second position, after Germany. Moreover, intense is also the constant presence in consumer goods (furniture, footwear, textile, clothing and accessories) due to the large influence of the Made in Italy products on Russian consumers.
The place of Italy in the field of capital and consumer goods, more specifically those of low quality, is threatened by the competition of the Chinese and Indian products, as well as the products of other countries, which look dynamically to the Russian market. This dynamics has taken great dimensions also because of the fact that in Russia the copyright law and the registered trade marks are not yet fully protected and this favours the trading of counterfeit products.
It should also be underlined the fact that the commercial presence of Italy remains weak out of Moscow and St. Petersburg and this marginalizes the Italian products in relation to these new dynamic markets.
In addition, Russian provinces have been also favoured during the last years by the economic growth and have registered increase of the living standard as well as the creation of a new middle class, with a predisposition to the consumption of west type products.
A large number of initiatives that the Italian side has promoted could address to the other regions of the Russian Federation. An obstacle regarding the growth of the commercial penetration of the Italian products results from the absolute absence of Italy in the sector of large commercial distribution, where there have already been established many enterprises (Swedish, German, French and Turkish). Moreover, it seems necessary that the packages of Financial Aid, insurances and promotion by the public Institutions (SACE, SIMEST, etc.) for the support of the enterprises should be more competitive in relation to the other countries’ packages
b) Assessment of direct investments to and from Italy
The volume of the Italian investments in the Russian Federation is still small. Some Italian enterprise, mainly of small dimensions, have realised certain investments in Russia (Marazzi and Concorde in the ceramics sector, Perfetti in the food sector, Indesit, Merloni Termosanitari and Candy στον in the sector of domestic electrical appliances, Mapei and Tegola Canadese in the construction sector).
The individual sectors’ analysis and the natural similarity of the two economies show that the productive presence of Italy in this country presents improvement opportunities.
As far as natural gas is concerned, Italy has a constant presence in Russia based on the strategic relation between Gazprom and ENI, which in the past has performed significant contracts such as the realization of the gas pipeline “Blue Stream” and the construction by SAIPEM of an oil pipeline and an “offshore” gas pipeline in the island of Sakhalin.
First of all, ENI and Gazprom have also concluded since last November a strategic Cooperation Agreement, which provides the exchange of assets that can guarantee to the Italian Group the access in the exploitation and development of deposits in Russia (“upstream”) and to the Russian monopoly the access in the distribution market of Europe (“downstream”).
Relevant opportunities are being examined for the foreign investors in the context of the following structural reform of the electric power sector. ENEL possesses a significant experience in Russia, particularly, through the contract-in 2004- for the management and the modernization of the central thermoelectric station southwest of St. Petersburg. The position of ENEL is much more enforced by the purchase of the 45% of RusEnergoSbyt (a company operating in the field of electric energy trading participating in the Russian group RAO-UES), realized in July 2006 for 105 million dollars. The relevant Russian demands turn to ENEL as an interlocutor in the context of the process for the liberation of the electric power sector. Recently, some opportunities arise also in the sector of nuclear power in sight of the Cooperation Memorandum concluded between ANEL and Rosatom.
The entry into force of the Kyoto’s Protocol includes also opportunities for bilateral cooperation in the field of the energy sufficiency and environmental protection programs.
The group Finmeccanica has consolidated its cooperation with the Russian companies in the fields of aircraft construction, defense and telecommunications.
In the field of aircraft construction, Alenia Aeronautica has signed an agreement with the main producer in the field of Russian aircraft construction (Sukhoi) for the construction of a middle range aircraft for the transport of passengers: “Superjet 100”. During the recent intergovernmental Conference in Bari has been signed the Protocol of Cooperation for the realization of the project “Superjet 100”: last procedural process before the start of the works. Moreover, the companies Aermacchi and Alenia Aeronautica (both belong to Gruppo Finmeccanica) have signed Pacts of Industrial and Commercial Cooperation with Yakovlev (Irkut Group) in the field of training aircrafts. Finmeccanica and Irkut have later signed an Agreement for the study concerning the matter of aircrafts without pilot using the platform of Yak 130. Finally, it was founded the mixed company Alenia Aeronautica/Irkut for the development of joint programs in the field o civil aviation.
Finmeccanica Group was later interested in selling in the Russian market the system of protected telecommunications Tetra, a product of OTE. After the conclusion of an Agreement between OTE and the Russian company Tetraprom, in last July has been founded a mixed company for the production of radio-mobile communication based on the Tetra standards. In 2004, OTE has developed a pilot project (of a 25 million euros value) for the supply of Tetra standards communication appliances to RAO UES in the province of Middle Volga.
Among the other companies of the Finmeccanica Group, are also mentioned Elsag, occupied with a competition of the Russian post offices in the field of postal automatisms and Alenia Spazio which in the past has supplied various satellites for the telecommunications.
Construction, infrastructure and transport Sector
Without a doubt Italy has the opportunity to improve its position in the sector of construction materials (in the Russian market operate Tegola Canadese, which has inaugurated its facilities for the production of constructive materials and Mapei, company which produces soldering materials) and infrastructures both sectors of an intense development (during the last years Codest has accepted various orders, while to Merloni Progetti have been recently assigned important infrastructure projects).
In the field of transports are deriving important perspectives concerning road transports (for example the Russian Government has expressed an interest in the Italian expertise respecting toll road network), railway transports (Finmeccanica Trasporti has signed a bilateral cooperation Agreement with Russian Railways for the supply of regional high speed trains, signaling, control and security mechanisms and systems) and river transports (Pietro Barbaro company has recently bought a river fleet for the transport of the oil from Volga). Lately, has arise the possibility of supply to Russian railways of the Pendolino train, whose most parts have been constructed in Italy, however, at this moment it belongs to the French Alstom.
The Italian presence in other industrial sectors such as metallurgy is still powerful but in a lower degree in relation to the past (Techint operates in the field of pipelines construction), iron industry (in 2005 Danieli was assigned with an order for the production of steel and since years has an important presence in Russia with the supply of ready for delivery facilities and machines).
FIAT Auto has recently signed with Severstal Avto an Agreement of a double profile, industrial and commercial. The industrial agreement provides the assemblage of the FIAT models “Albea”, “Doblo’” και “Ducato” in the new facilities in the city of Yelabuga, in Tatarstan. The construction will be realized in Turkey by Tofas, a mixed company of FIAT and the Turkish Group Koc Holding, and will be imported in Russia for assemblage.
Since 2009-when the operation will be complete- the facilities will produce 75.000 vehicles per year. The products intend to cover 5% of the Russian vehicle market of middle and small cylinders within 2010.
The commercial agreement provides that Severstal Avto will undertake the imports and commercialization in Russia of the main models of FIAT range: “Grande Punto”, “Panda”, “Croma” and the new “Doblo’”. In this context, it will be realised a distribution and support network consisted of 30 selling points of the FIAT vehicles in the main Russian cities, of which 10 in Moscow and 4 in St. Petersburg. This will guarantee to the Group of Torino a spread presence in the area, the lack of which-together with the absence of efficient post-selling services-constitutes so far one of the main problems for the operation of FIAT in Russia.
To Tecnimont have been assigned important contracts of the construction of polyethylene and polypropylene facilities.
Domestic electric appliances sector
Among the services that have realized important production investments in Russia is referred Indesit (acquisition of the construction factory of refrigerators, Stinol, construction of facilities for the production of washing machines and creation of a supply chain), Candy (acquisition of the domestic electric appliances production factory, Vyksa) and Merloni Termosanitari (electric- heaters production).
Another field, where Italian enterprises are especially dynamic is the ceramic sector. Marazzi, after the purchase of Welor Kerama, successfully operated since years in the Russian market, has completed its new facilities in the Province of Moscow. Another Italian enterprise of this sector which has realized a productive investment of important dimensions is Concorde.
Agricultural production sector
Another sector in which there are great opportunities for the Italian enterprises is the agricultural production sector, where are present Parmalat Group, which owns two establishments for the production of milk and juices (Ekaterinburg and Belgorod), Perfetti, which is going to open new gum and caramel production facilities, as well Ferrero (only commercial presence).
In the bank and finance sector, among the main investors is Banca Intesa, which has established its first bank with exclusively Italian funds (ZAO Banca Intesa) and enforced its presence in the Russian market with the acquisition of the control package of KMB-Bank, specialized in credits towards SMEs (the rest 25% of the capital was bought by EBRD).
The same bank intends to found-together with Vnesheconombank – an Italo-russian Bank which will be competent for the financing of entrepreneurial activities in Russia, as well as in Eastern Europe and in the CIS countries.
On its own behalf the Group Unicredito controls the eight Russian bank, International Moscow Bank (IMB), due to the acquisition of the German HVB. This last is also present with a leasing company, Locat, and has recently bought a Russian investment bank (Aton Group).
In November 2003, after the conclusion of a Special Memorandum, was founded “Task Force” assigned with the facilitation of a possibly creation of Italian industrial districts in Russia. In average “Task Force” meets twice a year, alternatively in Russia and Italy. At this moment is in process a conversation phase between the two Governments for the reorientation of the activities’ framework of “Task Force”, which has been invited to be occupied with the promotion of the Italian investments in Russia- and get involved in a higher degree in the investments world-mainly to the direction of the Special Economic Zones (SEZ), as well as the Russian investments in Italy.
The foundation of SEZ, in 2005, gave a new impetus to the districts project, and taking into consideration the fact that one of the districts that has been indicated by the Russians is the district of Lipetsk, where there is the seat of the production unit of Merloni Elettrodomestici and which could be considered as a “white area”. In the region of Moscow is also in a foetal form a ceramics industry in Stupino, where operate also the Marazzi Group and Mapei (soldering materials), as well as Concorde group. “Task Force” has indicated interesting perspectives of cooperation with the District of Vladimir (supply chain sector) and the Republic of Tatarstan (oil derivatives, lorries and tyres production).
Special interest for the Italian navigation presents also the intention of the creation of a special typology SEZ, which will include the harbour areas. There are important financial and fiscal facilities for the modernization of the infrastructures and the management systems of some certain Russian harbours of middle and large dimensions, including the creation of infrastructures for tourist embarkation and disembarkation concerning the new but already remarkable private fleet.
c) Assessment of trade and industry cooperation in priority high-tech sectors
There are perspectives for the development of the commercial and industrial cooperation forms concerning the high tech sectors, taking into consideration the fact that the Russian Federation still disposes excellent facilities. Among the potential cooperation sectors are mentioned aviation, energy, telecommunication, biotechnology, physics and laser technology, new technologies for the re-use of hydrocarbons and lubricants, the development of new materials and genetics.
In the aviation sector is valid a bilateral Agreement for the peaceful exploitation of the extra atmospheric space. In addition, the Italian Aviation Service and the Russian Aviation Service have started a joint action in the sector of space launchings and for the promotion of the space sector as well as the aviation sector, based on a Cooperation Memorandum signed in 2002.
As already mentioned, Finmeccanica has concluded co-operations with Russian Groups in various sectors of high technology: aviation, railways, postal automatisms, protected telecommunications.
After the ratification of the Kyoto’s Protocol by Russia, it is possible the development of a cooperation in the energy sufficiency and environmental protection programs, where Italy has excellent qualifications.
Italy and Russian Federation have signed, in the context of the “Global Partnership” program, Pacts for the distraction of the Russian nuclear weapons (already into force) and the Russian chemical weapons productions facilities. The value of the Italian contribution for the realization of the two Pacts reaches 720 million euros in total within a 10 years period.
In the army sector, Marconi Selenia Communications is present and supplies to Russia its telecommunication systems for continental, marine or aerial use as well as crucial infrastructures for the national security. There are also opportunities for Fincantieri (navigation constructions) and Galileo Avionica (aviation systems).
d) Suggestions on granting public financing and security in line with SACE and SIMEST
SACE promoted Russia in the fourth position regarding risk category: for both short-term and long-term period is provided the opening of Russia without any special limitations as far as the contracting parties, private and public, are concerned.
The operational opportunities for SACE are remarkable in sight of the enlargement of the entrepreneurship, which in past was addressed to the main contracting Russian banks Vneshtorgbank, Sberbank andAlfa Bank.
This service is now undertaking the assessment and eventual reliance on the contracting local banks as well as the assumption of direct risks from the local banks in order to correspond to the Italian exporters’ demands. The interaction with the Russian banks is expanded to a total of 51 credit institutes, 24 of which have already used the aid of SACE of 580 million euros total value.
Within the scope of the enterprises’ promotion and support actions, SACE has also signed a Framework of Assurance Contracts with various Italian banks.
The payment in advance of the debt of Russia towards the “Club of Paris” in July 2006 has affected Russia in relation to SACE. First of all, as a result of the improved rating of the country, the premiums were reduced (in average 5-10%) and this will allow the assurance of a bigger number of enterprises.
Simest has also adopted an open attitude as far as the Russian federation is concerned, financing enterprises and using a wide range of financial aids, such as investment facilities (law 100/90), commercial penetration attempts (law 394/81), facilities respecting export credits (legislative decree 143/98), as well feasibility studies and technical assistance programs (legislative decree 143/98). From 1999 to 2005 Simest deliberated 89 enterprises for a value of 1.509 million euros. Simest introduced together with Mediobanca and Vneshekonombank a loan range of 1,5 bil. Euros value for the financing of great industrial projects.
Simest has also grant an “ad hoc” capital of 70 million euros to Russia and Ukraine for the financing of mixed enterprises (total quota 49%) based on which at this moment there have been established 11 enterprises in Russia. This capital is available to all the Italian enterprises without developed entrepreneurial relations. The interventions for the raise of the capital derive from Simest within the framework of the ACT 100/90.