Tomaso Andreatta founded the Italian Chamber of Commerce in Vietnam (ICham), and in his then capacity as ICham’s first chairman signed its affiliation agreement with EuroCham Vietnam. He works primarily in the areas of Italian investment in Southeast Asia, international trade and project finance. As EuroCham’s current deputy chairman, he oversees work on ASEAN (Association of Southeast Asian Nations) integration, corporate social responsibility, corporate governance, and efforts to combat corruption in cooperation with the Vietnamese government.
Comprising a market of 600 million people with an emerging middle class, low wages and optimal investment conditions, Southeast Asia and the ASEAN customs union offer great opportunities for Italian firms. In some countries, starting with Vietnam, there is also strong national and European institutional support for internationalization efforts. But business owners – even of small firms – need to “put in an appearance“ and “go there and get it“, because this is a market that needs to be understood firsthand if its potential is to be best exploited. In an interview with the Aspen Italia website team, Tomaso Andreatta explains the opportunities that this region of the world offers for Italian firms both large and small.
In your opinion, does Southeast Asia hold promise for Italian firms?
Absolutely, and the great opportunity lies with the ASEAN area, to which Vietnam definitely serves as the best point of entry. ASEAN brings together 600 million people and today is already a preferential trade area, with tariffs in the range of between 0 and 5%. By 2015, a common market along the lines of that in Europe should be in place, although many observers – myself included – are skeptical about this, especially as regards the free movement of workers. The fact remains, however, that business is moving faster than institutions, and we have before us an area that is increasingly bound together by trade flows.
Of all the countries, Vietnam – with its 90 million inhabitants – has a sufficiently large market and a system which, despite bureaucracy, functions pretty well. In fact, there is a prevailing productive mindset – facilitated in part by Confucianism and a less fatalistic Mahayana tradition of Buddhism – and there are good foundations for economic development, given that foreign investments are protected and 60% of the country’s exports are already from the foreign-invested sector. In other words, anyone who brings technology and employment is welcomed.
What business opportunities could, in practice, open up for Italian firms?
Italy has excellent medium-tech mechanical engineering firms, and for some industries, where labor accounts for up to 50% of the final cost of the product, it becomes very attractive to come over and manufacture here in order to service the Asian market, since wages are a tenth of those in Italy. The opportunity to be seized would have to be that of better servicing a rapidly growing market in which we are generally not active, whilst retaining high-end production in Italy. Just as we are currently suppliers to the Germans, I believe that there are good prospects in Southeast Asia, including for supply contracts to large Japanese and Korean corporate groups.
So who then are the most active investors in ASEAN?
The major companies in this area are Japanese, Korean, Taiwanese and Singaporean, and they have invested heavily for cost but also strategic reasons. What’s more, China is becoming a very active investor, and countries like Japan will even carry barely lucrative or downright unprofitable investments so as to maintain a foothold in these markets and not yield too much ground to Beijing. On the other hand, this is an area where Europe generally has little presence when its relative economic influence is considered. In Vietnam, for example, European countries together contribute $26 billion in productive investment, whilst Japan, taken alone, invests almost $34 billion, and Korea, Taiwan, and tiny Singapore put in $28 billion each.
How does the Italian system support business investment in Vietnam?
The problem with the Italian production system is fragmentation: many firms come to sell components when other countries – and Germany comes to mind – provide turnkey installations.
It must be said, however, that Italian institutions in Vietnam (the Embassy, Italy’s Institute for Foreign Trade – ICE, and the Chamber of Commerce) work very well together, and have recently stepped up their focus on small businesses. In parallel, there are complementary efforts by European institutions, which have, for instance, pushed for the establishment in each country of a “trade center“ for SMEs, aimed at supporting particularly those European nations that are less active in the region. Finally, we shouldn’t forget that large corporate groups may have an interest in taking their suppliers along with them on their journey of internationalization, not so much for reasons of shared nationality, as that it is natural and convenient to continue to work together when there are established relationships in place.
So what do Italian entrepreneurs need, then, to be able to sell in this area?
In Asia, to sell, you need a local presence and a personal commitment from the entrepreneur. Due to the culture of the region, rather than any laws, personal relationships are important. You need to “show your face”, earn a reputation, and then trade on it. I’ve come across business deals that have fallen through because the entrepreneur didn’t show up in person. In terms of the investment required, all that’s actually needed is a branch office or – seeing as we’re talking about mechanical engineering firms – even a small assembly plant. These involve very modest financial commitments, sustainable even for firms with 50 employees, and capable of ensuring good prospects and better adaptation of products to local market needs. After all, we’re dealing with an area where, as the population becomes more affluent, it will need everything from tools and equipment to luxury accessories. And Italy can open up to these markets, but only if it really makes an effort to come and get them.
