Andrea Bonardi, Secretary General, Indo-Italian Chamber of Commerce and Industry spoke to indiamarkets about the present status of bilateral trade relationship between India and Italy.

indiamarkets: What is the present status of trade relations between Italy and India?

Bonardi: The trade relations between Italy and India are witnessing a period of stability. Italy is the fourth largest EU partner of India after Germany, UK and the Belgium, Luxemburg region. The indicative figures from the Italian embassy indicate that the total Indian exports to Italy were $ 1165.25 million while Italian exports to India stood at $ 744.95 million for the period April-March 2000. The main items exported by India are Cotton yarn, fabrics, made-ups- 11.68 per cent, readymade garments 8.27 per cent and leather footwear four per cent. Textiles, leather and food processing machinery make up 28.5 per cent of the total exports from Italy.

India’s exports to Italy increased by 13 per cent for the period April-March 2000 over the same period last year. However Italy’s exports to India have dropped by 42 per cent. This trend is mainly because globally investments are replacing trade. In this respect Italian companies are restrained in their ability to invest in foreign markets.

indiamarkets: What are the main constraints that are preventing investments by Italy into India?

Bonardi: 96 per cent of all Italian companies are SMEs. Companies are owned by the family and therefore are not likely to grow in size. This is because Italian legislation encourages companies to remain small. Italian companies are therefore restricted by their size and are consequently unable to invest financial or human capital in foreign markets.

Italian companies are very keen to provide high quality products, so they need partners that can match these standards. When the technology gap is too great, Italian companies find it difficult to bridge this gap.

Italians are very proud and jealous of their technology, yet increasing competition from low priced products convince them to share it with foreign partners. So Italians are keen to find reliable partners. They have been very happy with their Indian partners.

indiamarkets: What collaborations are possible between the two countries?

Bonardi: The trade complementarity between India and Italy is tremendous. Italy is a leader in machinery textiles, leather and food processing. Italy is on par with Germany, the world leader, in machinery for wood furniture, leather, textiles, food processing and the mechanical sector.

India and Italy can collaborate and tap the European market. Italy can subcontract goods from India that can then be sold by Italy after greater value addition and after meeting European compliance standards. Alternatively they can set up a JV to tap the Indian and the Asian market. Italy can provide technical know-how for the ventures. Italian companies are very good with technology but need local partners for marketing the products.

Indian IT companies are also realising the potential of the Italian market and started to consider possible collaborations. Italian bank Banca Sella already has an Indian JV. Finmatica, a leading software developer is also interested in collaborating for developing financial products. Today India is targeting only the US for its IT products. But tomorrow if the US finds that the Philippines is cheaper, it will move to Philippines.

indiamarkets: What can Indian SMEs learn from Italian SMEs?

Bonardi: A unique characteristic of Italian SMEs is that they operate in a cluster, which is a group of companies in the same line of business situated in the same area. These clusters are a natural formation in Italy. These clusters are self-sufficient. The components and spares required to produce these goods are also produced within the cluster.

They are a balance of competition and collaboration. The companies in the cluster compete with each other but also collaborate to increase their bargaining power and exploit economies of scale. Information travels rapidly within the cluster and there is great flexibility. Another strategy followed by the Italian SMEs is specialisation. The Italian company targets a niche and becomes a world leader in that specialised product. In fact, many Italian SMEs are mini-multinationals. They have few employees in Italy but have offices in various countries around the world.

indiamarkets: What should Indians keep in mind while dealing with Italian counterparts?

Bonardi:  It is not good to ask Italians for their technology immediately. Italians are possessive of their know-how. They cannot be pressurised and they must be convinced gradually. In fact many Italian companies prefer to give only outdated technology to their partners to prevent future competition. However in the globalisation era this strategy may not work in the long period.

indiamarkets: What are the functions of the Chamber?