n° 8 - March 1998

On the 15th of January, in Rome, together with the Tagliacarne Institute and the magazine Sviluppo Locale (Local Development), we organised a Convention to take stock of the policies adopted in our country in favour of the districts according to the intriguing article 36 of Law 317/91. One month later, together with the New Research and Montedison associations, we invited representatives of the Government to participate in a public debate on the theme of employment and development (Milan, 17th February). For quite some time now there have been as many conventions as there are districts, and this reflects better than any form of analysis the vivacity and dynamism of local production systems which, as has been demonstrated, effectively pay our country's commercial bill. To get an (inevitably biased) idea of the many appointments dedicated to the districts, in Italy and frequently abroad as well, simply browse through the list of events included at the end of this newsletters. The occasions of these events, just as their content, are often very different, but frequently the descriptive aspects of local claims prevail over the analysis of more appropriate means of intervention.
The Rome and Milan conventions, on the other hand, centred more on district policies.
In particular, the Milan meeting achieved a significant objective: members of Government in public debate with the protagonists of a phenomenon that has a particular importance for the national economic system. This could be considered routine in any other country, but when one considers the way in which the districts have been systematically ignored on a political level, the presence of the Prime Minister and the Communications Minister could be considered as something of a milestone: the directly interested parties finally around the table to discuss the industrial districts and policies for their development.
The two events attracted further media attention with regard to one of the few things, as the Prime Minister recalled in his speech, that the Italian economy has to flaunt on an international level. The success of the Italian district's image is a source of satisfaction for all friends of the Club which, by its statute, aims to raise its profile.
The Rome and Milan conventions marked a new opening into the political field for the districts, but is just the first point along a long and difficult path.
One of these difficulties is associated with their trivialisation. Nobody would think of institution Certificates of Origin to safeguard the good name of the districts; nevertheless one cannot stand by indifferent, for example, at the attempts to present Milan as a grand district, or at comparing development in India with the districts: The same goes for the race to put forward the district formula as a panacea for all ailments: unemployment, underdevelopment, large industry restructuring programs or the launch of technology parks.
The content and actuation times for district policies is the second, more difficult challenge the Club is called to face over the weeks to come.

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First public confrontation with the Government
(summary by Maria Gabriella Cerreta)

Industrial districts: the Italian route to employment and development

A convention was held on February 17th, at the Cariplo Congress Centre, promoted by the Nuova Ricerca association in collaboration with the Industrial Districts Club and Montedison which, together with many operators from the Italian industrial districts, was also attended by the Prime Minister, the Minister for Post and Telecommunications, the President of the Confederation of Italian industry and various representatives of the banking and media sectors. As one of our reporters observed, the convention proved to be a "full-immersion" in real economics for all concerned.
During the convention, the Club presented a series of proposals for the districts, made in Italy and Italian industry. Taking the invitation offered, the Club's President confirmed its willingness to actively collaborate in projects aimed at launching new districts in underdeveloped areas, and at promoting 'made in Italy'.
After increasing frequent declarations of interest in the Italian industrial districts, the convention finally saw the opening of a new season of intervention; indeed, the Convention's organisers presented the event as the Club's first public confrontation with the Government on the theme of policies for the industrial districts.
 

Romano Prodi, Prime Minister

After the greetings of the Mayor of Milan, Gabriele Albertini, the meeting opened with a presentation by the event's most illustrious guest, Romano Prodi, present not only in official garb, but as an authentic pioneer of studies on our industrial districts as well.
Prodi began by defining the industrial districts as "the only organic model for socio-economic development which Italy is offering the world", and reminded those present that at recent European summits the districts have been taken as a unique reference for balanced, sustainable economic development. He highlighted the capacity of local systems of small industry to reconcile economic growth and the continual flow of technological innovation with a high level of social integration and low unemployment. The basis of their success, he observed, can be traced back to a wealth of intangible factors inherited from the Italian 'districts', organisms which while being strongly cohesive are open to exchange with foreign markets as well.
The dynamic process of entrepreneurial replication, sustained as much by imitative competition as by the complex network of complementary relations throughout the entire production chain, has boosted and consolidated the collective institutions present in the territories, and translates into a broader participation in local social policies, a phenomenon difficult to find elsewhere.
A further merit of the districts, added Prodi, is certainly that of having conserved the smaller cities, by reducing the stimulus to migrate toward the metropolis. The resulting, typically Italian, urban structure, as well as offering higher living standards, surely has significantly lower management costs than those of a structure characterised by few large scale metropolitan systems.
Following this outline of the districts model's principal advantages, the Prime Minister paused on a few of the knottier issues, under the new light of changes in the international competitive context. He stressed the initial difficulties met by small companies when assimilating innovations that introduce great discontinuity, putting the productive and organisational practises which form the glue that bonds the districts under considerable strain; nevertheless, the districts continue to give convincing proof of their ability to react rapidly thanks to their wealth of experience and entrepreneurial capacity.
Prodi dedicated a few words to the theme of market globalisation, to play down the risks associated with productive internationalisation, provided that such processes imply company policies centred on quality and not simply on price-based competition; the later would certainly see Italy succumb to countries with significantly lower labour costs, such as China or India. The more mature districts which base their competitiveness exclusively on cost factors are equally at risk as the "newly established" districts, in other words, districts which have not as yet reached the "critical mass" which permits access to the economic advantages of large scale company structure.
While discussing these points, Prodi also paused on the problems of the South of Italy as well as on the configuration of the new and highly debated South of Italy Agency, though in this context, great improvements are demanded in the quality of investment, particularly in the light of European integration: an important role in this direction should be played by local banks which, strongly rooted in the territory, are in a privileged position to understand and eventually satisfy the real needs of local industry. Simplification of the administrative process, national contract reforms and the new standards of corporate governance, along with the expansion prospects of the European Union toward the East, further expanding the market for Italian produce, will most certainly contribute, as Prodi concluded in his own words "not to give the districts artificial respiration, but a climate in which they can develop naturally".

Paolo Sarti, President of the Industrial Districts Club

Paolo Sarti stressed the role of the industrial districts in the Italian economy in terms of employment, production and contribution to the success of the 'made in Italy' concept, which has its most brilliant outposts in the very districts, producing personal, household and leisure goods as well as the machine used for their production; he went on to emphasise how local small company systems constitute the most extensive reservoir of resources and know-how in the Italian industrial system, thanks also to their ability to conserve and continually rejuvenate their artisan, cultural and gastronomic traditions; he also recalled their capacity to reconcile their taste for the good life with continual innovative effort.
Though the media is increasingly focused on this original means of mobilising resources, noted Sarti, the industrial districts are still under represented in politics; they lack adequate support to maintain their collective capital and infrastructures, training possibilities and a whole series of intangible elements which form the basis of their competitiveness.
The absence of such government instruments has not hindered the industrial districts, often with the support of Local Authorities and Community funding, in realising their own interventions, with the creation of service centres for small - medium industries, laboratories, training courses, development areas and water treatment plant; despite these efforts, the gulf between the need for intervention and the resources currently given to district policies remains tangible and strong. The only attempt to change this situation, launched through law 317 dated 1991, which delegated authority to the Regions for intervention in the districts, ran aground on the rigidity of the statistical parameters contemplated for identifying the districts themselves.
Departing from this disappointing theme, Sarti went on to present a series of proposals on behalf of the Club, including new policies for the districts and 'made in Italy' in general which contemplate:

1. revision of the criteria adopted for identifying the industrial districts, transferring to the Regions the power to acknowledge as a district those areas territorially characterised by a perceptible nucleus of small-medium companies belonging to a common productive chain, linked by exchange which together serve to form a territorial identity associated with a particular type of production;

2. transfer to the districts (and particularly to district committees promoted by associations, the chamber of commerce, local services centres and authorities) of authority for economic development and industrial policies. Such committees would be officially recognised by the Regions as reference point for co-ordinating and defining development programs and interventions within the district, as well as for assessment of the activities undertaken;

3. extension to all recognised districts, regardless of whether or not they lie in underdeveloped areas, of recourse to negotiated programming instruments (territorial pacts, program contracts). 4) change in the system of incentives for innovation, by shifting the emphasis from the offer of research centres to the real demand from industry through programs which assign resources to companies which can then independently tend out to research agencies of their choice;

4. exploitation of district activities for promoting the 'made in Italy' concept on the international market. Sarti stressed how the commercial and personal relations of the districts constitutes an effective vehicle for promotion, not simply of the Italian productive system, but for the very artistic-cultural international image of the country itself; this type of communication initiative deserves greater attention and adequate support;

5. progressive liberalisation of electricity, gas and telecommunications supply services; district industries must be allowed the same conditions for purchasing these essential services as the grand industrial groups;

6. convincing support for the Italian Government with regard to the specificity of the districts and what they need from the European Union, which is continually issuing documents and launching programs for small/medium industry, but that ignore the territorial dimension and dense relations on which their competitiveness is based. In the Club's opinion, the proposals for intervention put to the Government representatives form an interesting reference framework for development policies dedicated to disadvantaged areas.
   In his comments of the delegation of power to the regions and local authorities contemplated by the Bassanini decree, the Club's President expressed to fears of many operators in the districts. Indeed, it is feared that the Region's as yet have neither the instruments nor the capacity to intervene in favour of the districts, and for this reason, Sarti invited the Government to consider a transition period, maintaining the role of initiator for the Regions with regard to intervention in the districts, as in the case of law 266 1997.
   Sarti did not limit his argument simply to presenting the requests of the districts, but offered the Club's willingness to engage itself in concrete projects aimed at launching the Southern districts and collaborating with the ICE, the Chamber of Commerce and the Foreign Trade Ministry in the promotion of the Made in Italy concept.

Enrico Bondi, Manging Director of Montedison

The theme dealt with by Enrico Bondi, head of a large industry, seemed somewhat eccentric, but as was subsequently explained, Montedison sees the districts both as a consistent source of clients, potential and otherwise, and as an example from which large industries have something to learn. According to Bondi, six significant lessons can be learned from district development.

• the first regards free enterprise and markets, elements typical of private sector industry, and today recognised universally as the only possible driver of development in advanced economies. The private enterprise at the basis of the proliferation of enterprise typical of the districts, has always been the catalyst for industrialisation in Italy, but it has taken years for this fact to be fully understood by the political powers. Entrepreneurs in the districts, added Bondi "have made necessity a virtue. Ignored by sweeping national policies, they've had to just make do. They racked their brains and, with no qualms, have been on the international markets for over thirty years, with the results everybody knows";

• The second lessons is associated with the antique cultural and artisan traditions of the districts, and the arts and crafts guilds; this has been wisely re-worked, enriched with new practical knowledge and rejuvenated in the districts' fertile industrial atmosphere;

• the third is essentiality; the districts have no space for the superfluous, and this makes a substantial contribution to containing costs. Bondi then defined the districts as "spontaneous multinationals" which, as opposed to large, structured industry, are highly dynamic and have an extraordinary ability to adapt and often anticipate change;

• this factor is closely correlated to the fourth lesson the industrial districts have to offer, this being flexibility; this presumes strong social cohesion between the various actors in the economic, social and cultural life of the districts. The idea of being part of a system which, to reach its objectives, requires that all its components function correctly acts as a stimulus quality work, and makes employment an instrument of social advancement which does not necessarily require the classic stages of formal education;

• the fifth lesson regards innovation which, as Bondi emphasises, should not be identified simply with the great technological leap connected with fundamental research. The industrial districts have been at the forefront of many new and highly innovative discoveries like, for example, "cool wool"; nevertheless many district innovations don't make headlines. Today, with the help of new Information Technology, even the smaller companies in the districts can take advantage of fundamental research;

• the final lesson is represented by the contribution the industrial districts make toward generating employment and creating value. In response to the sceptics who feel that a modern country cannot base its economic development on such so-called traditional sectors, Bondi presented a series of simple plates which gave a clear comparison of the added value of a number of 'made in Italy' sectors with that of several major industries in OECD countries. The data displayed showed, for example, that the Italian clothing - footwear sector produced added value in 1994 far higher that the German automobile industry, and that the added value of Italy's fashion and home furnishing system, together with the traditional mechanical sector, exceeded that of a series of sectors in the United States including pharmaceuticals, business machines, petrochemicals and soft drinks.

In conclusion, Bondi stressed how this type of performance demands consolidation of the links between the various actors in the districts, through the creation of consortiums and reinforcing of the networks linking suppliers and clients, particularly when one considers the new potential offered by the expanding European market. the final lesson is represented by the contribution the industrial districts make toward generating employment and creating value. In response to the sceptics who feel that a modern country cannot base its economic development on such so-called traditional sectors, Bondi presented a series of simple plates which gave a clear comparison of the added value of a number of 'made in Italy' sectors with that of several major industries in OECD countries. The data displayed showed, for example, that the Italian clothing - footwear sector produced added value in 1994 far higher that the German automobile industry, and that the added value of Italy's fashion and home furnishing system, together with the traditional mechanical sector, exceeded that of a series of sectors in the United States including pharmaceuticals, business machines, petrochemicals and soft drinks. In conclusion, Bondi stressed how this type of performance demands consolidation of the links between the various actors in the districts, through the creation of consortiums and reinforcing of the networks linking suppliers and clients, particularly when one considers the new potential offered by the expanding European market.

The district protagonists

Following these introductory presentations, the debate was further animated by the first-hand reports from a group of district entrepreneurs. Savino Rizzio from the Valsesia districts (valves and fittings), Gianfranco Bossi from Castelgoffredo (hosiery), Enrico Botto Poala from Biella (textiles) and Virgilio Bugatti from Lumezzane (taps and household goods). The descriptions of their respective industries offered a series of effective insights into the real Italian district atmosphere.
From all the cases presented, the difficulty in isolating the success factors of the individual enterprises from those of the districts became clear. These reports, full of personal anecdotes and experiences, highlighted the local level advantages of small enterprise systems and, with equal clarity, gave an in-depth analysis of the infrastructural constraints and deficiencies that currently hinder district development potential. Once more, among the most common form of competitive advantage given by the district structure, these entrepreneurs cited the influence of centuries old traditions which link a certain type of production to a certain place, and penetrates the collective experience of district populations, stimulating creativity; the confidence and social relations within these systems permits the diffusion of know-how, while the open atmosphere and internal competition stimulate the process of innovation. According to Bossi (Castelgoffredo), the districts are a gigantic, open school where a sort of "continual education" is being practised, which influences the entire working population. In many districts, he observed, a 'virtuous circle" has been created between the success of the district products and the mechanical sector. The proximity of mechanical plant end user companies effectively stimulated the development of specialised plant manufacturing companies which have subsequently become world leaders in their respective fields, like the Lonati group (Brescia) which produces machines for the production of socks and currently holds 90% of the world market share.
Botto Poala noted that one of the most significant factors which have fuelled the competitive advantages of Made in Italy, and in particular fashion products, is our distribution system, considered by many to be somewhat antiquated but that, thanks to its fragmentary nature, has effectively stimulated productive diversification.
Among the typical assets of the districts are the presence of a dense network of outside contractors, low levels of social tension and highly professional workforces, a precious factor which is becoming scarce in many districts.
 

Chamber of Commerce, associations and credit institutions

Three representatives of organisations working in direct contact with small/medium industry and their needs added their contribution to days proceedings: Mario Casoni, President of the Confederation of Italian Industry's Piccola Industria, Gianfranco Imperatori, President of Mediocredito Centrale, and Danilo Longhi, President of Unioncamere.
In contexts such as those previously described, observed Mr. Imperatori, actors and institutions have significant responsibilities in the district system incubation process;; in those cases where continual collaboration between the managing classes and local enterprise, which translates into the opening up of new industrial areas , infrastructures and services (training, credit and exportation), the districts have grown, and still have great prospects for future development.
The infrastructural knot was emphasised in many of the day's presentations. Among others, Mr. Imperatori outlined a specific role for credit institutions in the districts, offering project financing to counter infrastructural deficiencies A second request, linked in part to the preceding one, was a warning to the banking system, and in particular to local level banks, to avoid - in Longhi's words - "aping the quantitative expansion efforts of the major banks, concentrating rather on promoting a qualitative transformation aimed at consolidating territorial rooting, through the above mentioned forms of district financing".
Further knottier issues were touched on in conclusion, of which the smaller industries in the districts are constantly aware: the problem of training and the turnover of personnel within companies as new generations enter the workforce, an issue which is putting the continuation of numerous professions in jeopardy, excessive fiscal pressure and finally, excessive bureaucracy, some help against which is hoped for from the Bassanini reforms.
 

Giorgio Fossa, President of the Confederation of Italian Industry

Giorgio Fossa opened by confirming his faith in the Italy's chances of entering the European Monetary Union along with the first group of countries, despite the fact that, with respect to the past, Italy is now lacking one of the major factors which, until recently, significantly enhanced the country's performance on foreign markets: devaluation. In unequivocal terms, he declared that there still many hurdles to face. The first involving modernisation which, according to Fossa, has to involve maintaining a great deal of flexibility in the production system, taking account of the need to safeguard and develop the specific realities of the system, which themselves are responsible for consolidating the country's competitive advantage at international level. According to Conindustria's president, the creativity and capacity for innovation of these Italian companies has not simply allowed the country to keep up with growing competition from the emerging industrial countries, but has also consolidated Italy's presence in certain more mature sectors, in which other developed countries are at present loosing ground. Nevertheless this challenge cannot be taken on if something is not done about the initial problems faced by new enterprise caused by the country's currently rigid bureaucracy.
He went on to identify three points for priority intervention, the first comprising actuation of the Bassanini decrees which offer great opportunities for reforms in public administration, provided of course, that implementation of these reforms suffers no further delay, and that the decentralisation of administrative functions does not exclude passage from the public to the private sector of certain services previously managed by the State. The second point is represented by the achievement of greater flexibility in the employment market, in which current programs such as the 35 hour week risk to put the country back instead of enhancing its progress.
The third group of priority interventions has to be aimed at increasing investment in research and development, to allow Italy to reach European standards. The companies have to take the initiative alone, without necessarily waiting for government incentives which, in any case, cannot and must not substitute independent research efforts. The State's contribution in this context could be that of simplifying access, for example, to European funding, often so fraught with red tape as to discourage application from the private sector.
Fossa concluded with an affirmation illustrative of the revolution currently happening within the Confindustria itself: "the industrial districts are the wealth of our Country, where the potential of small and medium companies is expressed to the full. They consist of a uniquely integrated network of industries which are the envy of many other countries. Using this asset in the development of industrial policy is surely the right course of actions, that has to be extended to the rest of the Country ". Fossa thereby proposes to use the districts as a means of testing the effectiveness of new industrial policies, taking advantage of the speed at which they are able to respond to external stimuli, thanks to their flexible structure. Closing, he cited the example of the "virtual district" introduced for the first time in Prato to reduce telecommunications costs, a project which blazed a trail for similar interventions throughout Italy.

Antonio Maccanico, Telecommunications Minister and President of Nuova Ricerca

In the final presentation, Communications minister Antonio Maccanico replied in favour of the numerous issues emerging throughout the day; he agreed with Sarti's request to review the criteria currently applied to identifying the districts, introducing greater flexibility, and to promote the liberalisation of telecommunications, electricity and gas supply; Maccanico also expressed appreciation of the Club's willingness to collaborate in projects for the diffusion of the district concept in the South of Italy, in just the places where previous State intervention has failed. He quoted the case of a number of fashion system districts in the North which have 'delocalised' part of their production process to the South, stimulating the growth of production poles which, in future, could develop the characteristics of full blown districts. Showing his agreement on the need for bureaucratic and fiscal slim re-dimensioning, the Minister paused on the current risk to the Irap structure, which contemplates eliminating the deductibility of capital related costs and forms of temporary collaboration with external workforces, and on their potential consequences for district type structures.
In conclusion, Maccanico proposed a division of roles between the State and the industrial districts, to reach the common objective of overall development for the country's economy. To the districts, the role of contributing creativity and innovation, to the State, that of liberalising and rendering public services more efficient.
For the Nuova Ricerca association and the district Clubs, the Milan convention was seen as the first of a series of opportunities for districts and Government to meet and work together. The minister concluded the day's work with an official promise to regularly convene the district Clubs, Presidents of the Regions and Government ministers involved in accelerating the adoption of actions in favour of the districts, to promote the diffusion of this unique means of organising production in the country's less developed areas.

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The French Industrial Districts Club

On February 27th 1998 the French industrial districts club held its 4th meeting at Beziers, a small centre in the Region of Languedoc-Roussillon.. The Club is made up of around ten districts: the Vallee de l'Arve, precision metalwork; Vimeu, taps and fittings; Oyannax, plastics, Tour du Pin, textiles; Biterois, metalworking; Roanne, textiles; Thies, cutlery; Cholet, footwear and clothing; Millau, gloves and leather goods; Valle de l'Olmes, textiles. The meeting offered all participants the opportunity to share their experience of local politics and the problems with local small industrial and sub-supply system development. The Industrial Districts Club was also invited. Following the contacts made with the Spanish districts (see newsletter no.7) this is a further contribution to the program aimed at developing a European districts network, and EU recognition.

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News and Events

The Club's voice
Many meetings and conventions have recently been held on the theme of industrial districts; along with the two events organised directly by the Club in Rome (15th January with the Tagliacarne Institute and the magazine Sviluppo Locale) and Milan (17th February with Nuova Ricerca and Montedison), the club also took part in the following events:

 

1. Lombardy Region Ulivo work groups, the Province of Brescia and the mountain communities of Val Trompia and Val Sabbia
   I distretti industriali: bilancio e prospettive. Politiche di sviluppo in Val Trompia e Val Sabbia-
   The industrial districts: balance and prospectives. Development policies in Val Trompia and Val Sabbia
   Gardone Val Trompia, 17th January 1998
   
    

2. CCIAA (Chamber of Commerce for Industrial, Artisan and Agriculture) in Treviso
   Esperienze e prospettive per un rilancio dei vantaggi competitivi territoriali
   Experiences and prospectives for re-launch of territorial competitive advantages
   Treviso e Montebelluna, 19-20 gennaio 1998
   
    

3. Consortium 21
   Dal programma network verso una politica dei distretti
   From the network program toward a policy for the districts
   Cagliari, 12 febbraio 1998
   
    

4. Almatec, Sidemva
   4 Ème rencontre des districts industriels
   4th meeting of the industrial districts
   Beziers, Francia, 27 febbraio 1998
   
    

5. Eurobic Dolomiti
   Subfornitura e distretti industriali
   Sub-supply and the industrial districts
   Longarone, 28 febbraio 1998
   
    

6. CGIL, CISL, UIL Veneto
   Giornata di lavoro per discutere la proposta della Regione Veneto per l'individuazione dei distretti industriali
   Workday for discussion of the Veneto Region proposal for definition of industrial districts
   Vicenza, 3 marzo 1998
   
    

7. Università Bocconi
   Distretti e politiche di sviluppo locale
   Districts and local development policies
   Milano, 25 marzo 1998

Pubblicazioni
 

1. Istat
   I sistemi locali del lavoro 1991
   Local employment systems
   Collana argomenti, n. 10, 1997
   
    

2. G. Corò, E. Rullani
   Percorsi locali di internazionalizzazione. Competenze e auto-organizzazione nei distretti industriali del Nord Est
   Local routes to internationalisation. Competence and self-organisation of the North East districts
   Franco Angeli, 1998
   
    

3. G. Bodo, G. Viesti
   La grande svolta. Il Mezzogiorno nell'Italia degli anni novanta
   The great turnaround. The South in the Italy of the 'nineties
   Donzelli, 1997

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Copyright©1998 by Club dei Distretti Industriali