Leading player in Italian economic diplomacy in Russia

Economic cooperation between Italy and Russia used to be quite exemplary in many respects, withstanding diverse hardships. Yet the COVID pandemic and subsequent lockdown have inevitably made their influence. In an interview to Invest Foresight, Vincenzo Trani, President of Italian-Russian Chamber of Commerce, described how the Chamber has refocused its operations and priorities.

— How successful has IRCC been in developing bilateral small and medium businesses cooperation?

— Bilateral development between small and medium-sized enterprises is not a new thing, already in 2002 during the Sochi Forum it was highly topical. The primary objective, now as then, was to create a bilateral lever, which would allow the creation, first and foremost, of an economic fabric similar to the Western one, favoring a private entrepreneurial climate, made up above all of SMEs and “industrial districts”, to be created on the model of the Italian ones and with the participation of Italian companies. The IRCC in this has always been a leading player in the Italian economic diplomacy in Russia.

The first obstacle to overcome is “russophobia” and bad information on the opportunities that the Russian Federation can offer. In Europe this country still remains shrouded in mistrust when in reality Russia and Italy have various cultural similarities and technical production skills in many sectors.

The second major obstacle remains the sanctions that limit the operations of a foreign investor in Russia and which in this historical moment represent something anachronistic.

A successful example is certainly the “Made with Italy” where Italian SMEs produce locally in Russia using the Italian know-how with a partner or Russian raw materials. Another important result is the digitization of all tenders open in the Russian Federation, which allows SMEs to create synergy with other SMEs and large Russian industries. I believe that the real added value of this cooperation consists in the exchange between speed and organization, between agility and planning, between spontaneity and planning. From this synergy everyone comes out winning and enriched.

— How effectively Russian special economic zones play a role in promoting economic relations between the two countries in the current pandemic situation? How has the number of residents and operators in the special economic zones changed recently?

— The Russian special economic zones have played an important role in attracting new strategic investments to Russia since their creation. Although at the beginning of their establishment they had a lukewarm response, today some of these confirm their strategic importance and attractive value for foreign entrepreneurs.

Italy has immediately started collaborating with many of these zones, including ones in Kaluga and Lipetsk. In 2019, two major settlements with Italian capital were opened in Kaluga and now, even during the pandemic crisis, three Italian companies are working on opening production sites in Lipetsk Region, in one case the investment in progress is very important.

From the point of view of Italian operators in these areas, there continues to be an increase in interest and in the number of companies, for various reasons, interested in locating themselves in these special economic zones.

— Are Italian companies and investors seeing a major decline in their yields in the Russian market? Is the oncoming second COVID wave likely to produce a further impact on the attractiveness of the Russian market?

— The Italian-Russian Chamber of Commerce, together with all the players of Italian economic diplomacy in Russia, continuously monitored the market by offering support to businesses and collecting the progress of Rome-Moscow relations through a survey open to members of the IRCC.

During the pandemic period, the associates confirmed that the volume of sales has decreased in 84% of the companies. Related to the amount of losses, for 40% of the shareholders interviewed by the Italian-Russian Chamber of Commerce, it is between 250K and one million euros while for 16.8% it exceeds one million euros.

The exchange between Italy and Russia in the period January-July 2020 (according to the data of the Italian Institute of Foreign Trade) contracted by marking a -23.4%, settling at only €9.7 bln (in the same period in 2019, the trade was €22.5 bln). The import-export between Rome and Moscow bears the negative sign (-9.4% exports from Italy and -33% exports from Russia). The trade balance between Italy and Russia is at -83.1%. These numbers are certainly not comfortable and caused by a sudden closure of the borders and the reduction in travel.

Despite the data showing a negative scenario, I would like to underline that the health of the Italian-Russian business remains in good shape and with good growth expectations.

The major problem for Russia remains the sanctions. Therefore, the second COVID wave can only have a marginal impact on the business. In the “new normal” reality many businesses have digitalized and, although essential, physical presence or travel are now less essential for the success of a business.

— How far has IRCC advanced with launching an e-commerce marketplace platform?

— The idea of creating an e-commerce platform to catalyze the attention and research of Italian and Russian products remains a priority for our association. The pandemic delayed the launch of this new project as the needs of associates and companies have changed and the IRCC has therefore accelerated the launch of new services such as the possibility of creating digital fairs and showrooms, access to rapidly changing regulations, access to all Russian and Italian newspapers, the tender platform and the creation of a dialogue table to promote the financial aid for foreign companies in Russia. Regarding e-commerce, for the platform to be successful, it is also necessary to create the “green channel” between Italy and Russia, essential for maintaining a high-quality service.

On this we are actively working with various institutions, underlining this pressing need.

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