Club of Metropolitan European CCIs

The international economic situation

and CCIs challenges

Carlo Altomonte

Milano, June 8th 2012

How are we doing ? Today vs. Great Depression

World Industrial Production Volume of World Trade

Source: Eichengreen and O’Rourke (2012)

An heterogeneous picture across countries: GDP

-5

-2.5

0

2.5

5

7.5

10

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

(f)

2013

(f)

2014

(f)

United States World BRICs Euro area

Real GDP Growth rates, 2000 – 2014 (forecast)

Source: IMF, World Economic Outloook

The short-term agenda: eliminate the negative feedback loop in EU

Common bank resolution frameworkPan-European deposit guarantee scheme

EU-level supervision

Fiscal compact & ‘Six pack’Euro-bond scheme (various

proposals)

Structural reformsProject-bond & infrastructuresRole of EIB and EU Budget

-15

-10

-5

0

5

10

15

20

25

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

(f)

2013

(f)

2014

(f)

United States World BRICs Euro area

A (less) heterogeneous picture across countries: trade

Volume of Export Growth rates, 2000 – 2014 (forecast)

Source: IMF, World Economic Outloook

Trade in intermediates is on the rise

Trade in intermediates nowadays dominates trade flows, representing 56% of trade in goods and 73% of trade in services in OECD countries. Brazil, China & India each has a share of intermediates in total imports of more than 70%, well above the OECD average of 56%

Source: OECD

The role of Global Value Chains

Source: Der Spiegel, 2001

The long-term agenda: capture your share of (growing) global demand

Source: OECD

How much value added are you able to retain ?

Source: US Dep.t of Commerce

A comparative analysis of FDI across European Regions

Tabella 4 (numerazione del Report) - Sintesi

Region N. of firms

Avg. N. Empl.

Avg. Tot. Assets

Avg. Revenues

Avg. ROE

Avg. EBIT

Avg. K/L

Avg. LP

Avg. ULC

Avg. TFP

Brussels Capital Region 780 113,79 355.749,98 48.017,81 15,81 2.229,38 1.106,7 182,93 0,62 2,87 Baden-Württemberg 1.155 240,43 83.857,86 51.006,41 15,42 3.548,83 350,90 98,9 0,71 2,13 Bayern 1.623 210,51 92.922,90 43.413,74 12,33 3.158,59 526,05 116,77 0,72 2,22 Brandeburg 115 187,44 110.292,75 38.042,49 14,41 3.274,31 346,19 80,15 0,68 5,99 Madrid 3.475 97,34 97.039,34 30.636,86 19,39 1.411,65 545,16 99,12 0,67 4,34 Cataluña 3.626 64,41 26.941,15 17.436,34 16,10 722,75 330,97 75,85 0,69 3,07 Île-de-France 12.565 45,72 45.473,86 15.118,91 23,20 615,44 383,27 107,07 0,75 2,96 Rhône-Alpes 6.817 29,2 11.783,30 7.424,35 23,78 312,37 223,44 79,14 0,74 2,12 Leinster 1.507 105,32 210.648,26 38.174,56 25,82 2.417,44 983,12 73,56 0,69 1,55 Lombardia (Milan) 12.982 42,83 25.300,62 12.813,13 12,49 545,64 550,36 92,87 0,63 3,3 Lombardia (No Milan) 15.012 27,01 8.862,49 6.453,26 11,81 313,02 412,95 72,29 0,63 2,06 Inner London 6.902 107,35 315.846,37 27.634,58 25,73 1.301,07 885,30 146,34 0,7 2,39 Outer London 2.429 154,08 124.257,20 31.750,59 28,72 1.179,72 518,20 92,42 0,7 1,54 Total 68.988 57,99 70.283,71 16.728,10 18,11 754,95 473,42 93,35 0,68 2,73

Source: Milan Chamber of Commerce

The role of organizational structure in Multinational Groups

Regione N. affiliate N. gruppi N. medio controllate

N. medio paesi

Brussels Capital Region 780 420 226.7 33.3 Baden-Württemberg 1,155 520 136.3 23.3 Bayern 1,623 706 131.1 21.9 Brandeburg 115 56 233.6 24.1 Madrid 3,475 1,186 148.1 24.3 Cataluña 3,626 942 129.3 21.8 Île-de-France 12,565 1,749 119.2 21.3 Rhône-Alpes 6,817 433 144 21 Leinster 1,507 733 174.7 24.5 Lombardia (Milan) 12,982 1,285 127.4 22.3 Lombardia (No Milan) 15,012 507 97.4 15.9 Inner London 6,902 2,448 71.1 10.5 Outer London 2,429 635 114.1 18.5 Totale 68,988 6,653 57.8 10.9

Source: Milan Chamber of Commerce

Regione GIC

Medio

Gruppi (%) con affiliate in paesi a regime fiscale

favorevole

Gruppi (%) con affiliate in più di un continente

Gruppi (%) con affiliate

nel comparto finanziario

Diversificazione settoriale

Brussels Capital Region 2,33 1 0,92 0,91 0,72 Baden-Württemberg 1,89 0,8 0,88 0,72 0,69 Bayern 1,84 0,8 0,83 0,71 0,68 Brandeburg 2,04 0,73 0,82 0,71 0,68 Madrid 2,19 0,86 0,87 0,79 0,69 Cataluña 1,97 0,8 0,87 0,72 0,67 Île-de-France 1,94 0,82 0,89 0,75 0,68 Rhône-Alpes 1,79 0,75 0,81 0,73 0,65 Leinster 2,34 0,74 0,88 0,85 0,65 Lombardy (Milan) 1,79 0,76 0,82 0,73 0,65 Lombardy (No Milan) 1,35 0,53 0,61 0,61 0,56 Inner London 1,47 0,5 0,86 0,58 0,51 Outer London 1,77 0,65 0,88 0,64 0,63

The role of organizational structure in Multinational Groups

Source: Milan Chamber of Commerce

Conclusions

The world economy is moving from the quick post-crisis recovery to a slow rebalancing, with significant institutional and political challenges / headwinds in the short run (especially in the Euro area, but not only….)

The production structure of the world economy (trade) seems relatively less affected by these dynamics, as trade flows have recovered more homogeneously across countries; also, a significant structural break in production patterns has not emerged in the post-crisis world => GVCs will continue to dominate the world production picture over the next years

GVCs provide a crucial link between a high-skill / low-growth location and fast growing global markets. As such, CCIs should foster an efficient connection between local firms and Global Value Chains

Not only export-promotion policies: fostering imports and foreign participation are key success factors to allow the local business environment to become connected to GVCs

In particular, according to the comparative research carried out by the Milan Chamber of Commerce, attracting more ‘complex’ multinational groups (geographically more extended but relatively less diversified in terms of sectors) in a territory seems to be an important factor to activate links with GVCs and thus foster competitiveness