Opportunity knocks with clean hands

THE MOST persistent sound in Italian business today is the thud of falling masonry. As if the recession were not enough, the pillars of industry, firms such as Fiat and Ferruzzi, have been shaken to the core by corruption scandals. And the unwritten pact between big business, the political parties and powerful state managers has been shattered, according to Carlo De Benedetti, leaving a question mark over the future of some companies.

Last week Mr De Benedetti, chairman of Olivetti and one of Italy's leading businessmen, was placed under house arrest while being investigated on corruption charges. Further away from the headlines, small- and medium-sized businesses are struggling to make ends meet, devastated by the paralysis of the public sector on which so many had depended.

It is a time of unprecedented turbulence and disorientation. But it is also, according to a voice suddenly commanding attention and respect, a time of enormous opportunity for Italian business. The voice is that of Aldo Fumagalli, president of Italy's Young Entrepreneurs and vice-president of Confindustria, the equivalent of Britain's CBI.

'The country is going through a period of epochal change. That is full of dangers,' he says. 'But it also brings with it the chance to break free from past prejudices, to use the return of real open-market competition to rediscover that audacity which made Italian business so strong.'

Mr Fumagalli is a chemical engineer, with experience of having worked in the US - for Union Carbide. He is now his father's number two at their northern Italian family firm, SOL, which has Europe-wide activities in industrial gases. A keen rugby player, he is only 35 years old.

His youth, far from being a disadvantage, is the very reason why Aldo Fumagalli's face is becoming familiar on magazine covers and television screens in Italy. He symbolises the new generation of businessmen - those with clean hands.

The Young Entrepreneurs have been extremely outspoken in support of political reforms from as early as the beginning of the 1990s. The involvement of business is crucial to the process of renewal, Mr Fumagalli said. 'The fatal error made by big business in the past was to overestimate its power, and think itself immune to the corruption of the political system - that its effects could be controlled. The firms and businessmen who are tainted now have a moral responsibility to encourage a really open system.'

Countless companies that for years have been effectively shut out of deals because they did not know the right people or pay the required bribes suddenly have a chance again.

'We are getting back to a system where the product and price are what count - not the telephone call at midnight. This is an enormous opportunity for business, giving them again the taste for healthy competition. You only have to look at the recent public works contracts in Milan, where prices are well below those of recent years.'

He criticised those who argue that the traditional industrial giants may not survive reforms. 'Those who think Italy can become the world's fourth biggest economic power on the strength of small- and medium- sized firms have not understood anything,' he said. 'We need more firms like Fiat and Olivetti; we need firms to get bigger and more international, moving up and outward. This must become strategic choice.'

This appeal is directed especially at the multitude of smaller family firms, like his own, which dominate Italy's economy. 'The family firm has enormous strengths, particularly because of its ability to impart strong family values such as identity, loyalty, pride and sacrifice to the workforce. But it can also be an obstacle to progress because of its suspicions, its being closed in on itself,' he said.

Two of the most important changes in what he calls the 'new enterprise' taking shape in Italy will be a greater willingess to go to the stock market and to get involved in international ventures.

Apart from the handful of giants that between them account for two thirds of the capitalisation of the Milan bourse, most firms tend to regard the stock markets with suspicion, preferring to borrow from banks. 'But nearly all the main banks are state-owned, and that is precisely where the problem of political influence began,' Mr Fumagalli said. 'The planned privatisation will change this. But only when more firms begin using the stock exchange will we have a modern open market.'

His own firm, with 550 employees and a turnover of L220bn, is fast reaching the size where it would benefit from a market listing. 'We are examining it but we have to proceed carefully - for, in industrial gases, we are the only family firm left in Europe in a market otherwise dominated by multinationals like BOC,' he said.

He added that Italy is now overwhelmed by a sense of fin de regime. 'There is much confusion, but one important effect is that complacency has gone. If we can get through the period of change, our chances for the mid-Nineties are enormous.'

(Photograph omitted)