The Economy in South Tyrol

1 ECONOMY IN FIGURES THE ECONOMY IN SOUTH TYROL – CURRENT DATA, INDICATORS AND DEVELOPMENTS An economics teaching resource for use in upper secondary and vocational schools, with references to topics dealt with in the INFOCUS modules.

The INFOCUS modules provide in-depth information on various aspects of the South Tyrolean economy for students. They can be obtained free of charge here: http://www.wifo.bz.it/infocus [email protected]; T +39 0471 94 57 07

NEW: You can find all INFOCUS modules in VIDEO format at 9 http://www.wifo.bz.it/video 19 The term ECONOMY (from the Greek for “housekeeping“ or “management”) refers to all activities involved in the production, distribution, exchange and consumption of goods and services. 02

ECONOMIC FACTORS

Geographical Location 4 Economic History 5 Population 7 Consumption 8 Employment 9 Gross Domestic Product 10 Businesses 12 Manufacturing Structure 13 Growth Factors 14 Foreign Trade 15 Primary Sector 17 Secondary Sector 19 Tertiary Sector 21 Challenges 26 South Tyrol’s ECONOMY

Find out about South Tyrol’s economy with Elsa…. Elsa is a schoolgirl from South Tyrol who has just moved to Germany for a year. During the Economics lesson, the teacher asks Elsa to give a presentation on the economy in South Tyrol for her new classmates, who are curious and would like to learn more about the new girl’s home region. These are just some of the questions her classmates ask her and that Elsa attempts to answer:

WHAT ARE THE FEATURES OF SOUTH 03 TYROL’S GEOGRAPHICAL LOCATION?

HOW IS THE POPULATION MADE UP? WHICH HISTORIC EVENTS AND HOW HAS THIS HAD THE GREATEST CHANGED OVER THE YEARS? INFLUENCE ON SOUTH TYROL’S ECONOMY?

HOW IS THE EMPLOYMENT SITUATION IN SOUTH TYROL? WHICH SECTORS OF THE SOUTH TYROLEAN ECONOMY ARE THE MOST PRODUCTIVE? HOW IMPORTANT IS FOREIGN TRADE FOR SOUTH TYROL?

SOUTH TYROL in figures

Area 7.400 km² Life expectancy 81,4 years for men Inhabited area 21.991 hectares (2,97 %) 86,2 years for women Inhabitants 531.178 Businesses 58.454 Population density 72 Inhabitants/km² Persons employed (2016) 281.800 Capital Bolzano/Bozen Employment rate 73,5 % (107.739 inhabitants) Unemployment rate 2,9 % Municipalities 116 GDP per capita (2016) 42.900 € Languages German (69,5%), Italian (26,0%), Ladin (4,5 %) GEOGRAPHICAL LOCATION

Before she begins to give her classmates an Tyrol-Trentino, which is intended to promote insight into the economy of her home region , cross-border social, economic and cultural co- Elsa would like to give the class an introduction operation. Covering an area of 7,400 km², South to South Tyrol and its geographical location. Tyrol is Italy’s largest province in terms of size 04 and is classified as a mountain area (along South Tyrol is Italy’s most northerly province. with Trentino and Val d’Aosta). Therefore only The area, which lies in the heart of the Alps and a small part is habitable and economically is located in the centre of Europe, borders on viable. Austria, Switzerland and the Italian provinces On the other hand, it should be noted that the of Sondrio, Trento and Belluno. Moreover, mountain landscape, with peaks reaching South Tyrol together with the province of almost 4,000 metres in height has become a Trento and the federal state of Tyrol forms driver for a flourishing year-round tourism Euregio, or European Region Tyrol-South industry.

The Brenner Axis, one of Europe’s major traffic arteries and the most important Alpine pass, crosses through South Tyrol, and hence acts as a bridge between Italy and Central Europe. For this reason foreign companies are attracted to South Tyrol, from where they can serve the Italian market.

> 2,000 m 37 %

1,000 m - 2,000 m 49 %

< 1,000 m 14 % ECONOMIC HISTORY ECONOMIC HISTORY

In order to gain a better understanding of the major change in general economic conditions. economy, we need to know how it developed. Under the Italianisation scheme driven by Elsa therefore decides to review some of the Fascism, heavy industry was introduced into milestones in South Tyrol’s history that have the southern part of Bolzano/Bozen. After the had the greatest influence on the development Second World War there began a period of 05 of the local economy. reconstruction and economic growth. With the support of a far-sighted policy, outlying Due to its natural geographical location, South areas were upgraded and the exodus from Tyrol has always been a transit area and a rural areas thus averted. At the same time meeting point between populaces belonging to tourism developed and became a major the two largest cultural areas north and south economic driver. During the 1980s and 1990s of the Alps. As early as Roman times, South the number of inhabitants stabilised and Tyrol was an important trading centre due to economic prosperity became consolidated. the construction of the Via Claudia Augusta. The beginning of the 21st century has been Around the year 1200 Bolzano/Bozen started characterised by the opening up of markets to hold market fairs. Despite its favourable and the challenge of facing international location however, over the course of its competition with an economy based on a history South Tyrol was for a long time a poor structure of small businesses. region. The economic base was predominantly mountain agriculture, which was generally less productive and often affected by major crises, along with crafts and mining. Industry did not develop until after 1850, when the most traditional sectors (wood, textiles and food) The Second Statute of Autonomy of 1972 gave became established. The annexation of South South Tyrol extensive political and economic rights, Tyrol by Italy after the First World War led to a including wide-ranging financial autonomy and numerous legal and administrative responsibilities.

First power station “Option” Trentino–South Tyrol, Tyrol in South Tyrol agreement and Vorarlberg regional Inauguration of new Bolzano agreement (Accordino) Exhibition Centre 1897 1939 1949 1998

1635 1935 1946 1972 2027 Establishment of the Industrialization Gruber-De-Gasperi Second Statute of Brenner Base mercantile magistra- of Bozen agreement Autonomy Tunnel te (forerunner of the Chamber of Commerce)

… THE SECOND STATUTE OF AUTONOMY LED TO WIDE-RANGING FINANCIAL AUTOMONY, THANKS TO WHICH 90% OF TAXES LEVIED IN SOUTH TYROL REMAIN IN THE PROVINCE?

… 1850 ALMOST 80 % OF 06 TYROL’S POPULATION WORKED IN THE To Do AGRICULTURAL SECTOR? TASKS TODAY AROUND 8.2% OF THE WORKFORCE IS EMPLOYED IN THIS SECTOR. 1 ) 37.2% of South Tyrol is covered in mountains over 2,000 metres high, only 6% of the area is habitable. Protected areas (biotopes, nature parks, national parks and areas under environmental protection) account for almost 40% of the area of South Tyrol. List the advantages and disadvantages of these geographical conditions.

2) Economic history describes the development of the economy of a country … THE ACCORDINO WAS SIGNED over the course of time. It therefore examines historic events and their effects on individual IN 1949 TO PROMOTE TRADE economic sectors, but also on politics and BETWEEN SOUTH TYROL AND THE society. NEIGHBOURING AUSTRIAN REGIONS Can you think of any events that have DURING THE PERIOD AFTER THE influenced the development of South Tyrol’s SECOND WORLD WAR? economy in recent years? THE PURPOSE OF THIS AGREEMENT WAS TO FACILITATE TRADE BETWEEN THE REGION OF TRENTINO-SOUTH TYROL AND THE AUSTRIAN FEDERAL STATES OF TYROL AND VORARLBERG.

POPULATION

Elsa knows that the population forms the basis With regard to education, nearly 20,000 of social and economic development. students attend an upper secondary school while more than 10,000 choose vocational There are531,178 people living in South Tyrol, training (full-time or apprenticeship). 11% of which corresponds to just 0.9% of Italy’s total the resident population today are academics, 07 population, although it is the largest province in 2001 they accounted for only 7%. in terms of surface area. Due to its geographical features (mountain area), South Tyrol is relatively sparsely populated. The average population density is 72 inhabitants per km2 while 2,058 people per km2 live in the capital HOUSEHOLDS Bolzano/Bozen. More than half of South Tyrol’s in South Tyrol population lives in rural areas. The average age of the inhabitants is43 years Year Total Average and life expectancy in South Tyrol is above the Households Size national average. 1981 130,580 3,2 1991 146,928 3,0 2001 173,914 2,6 2011 204,416 2,4 2015 217,131 2,4 2018 223,612 2,3

Year

100

60 Due to a slight decrease in the number of children 50 MEN WOMEN and an increase in longevity, the average age in South 40 Tyrol is on the increase. The sharp drop in 70-year- 30 olds is due to the drop in births at the end of the 2nd 20 World War, the peaks in the 50 and 60-year-olds to

10 the baby boom that followed.

0 5.000 3.000 1.000 1.000 3.000 5.000

In order to gain a complete picture of society in household expenditure. It is therefore the South Tyrol, Elsa needs to identify sources of consumption of non-food goods and services in income and household consumption patterns: particular that weigh heavily on the household so she asks how much households earn on budget. These include costs for housing, 08 average and how much they spend. mobility, accommodation and food services and leisure and cultural activities. In our market-economy1 based society, income and its distribution are key aspects of community life. To compare the prosperity levels between different categories of Household households we use disposable income. This INCOME can be used to calculate indicators that identify poverty. Households in South Tyrol have an Type of Household Average Income average household income of 36,774 euros. Parent with one or more dependant children 30,093 € As regards consumption, in 2017 households in Couple with one South Tyrol consumed on average goods and dependant child 49,268 €

services for a value of 3,417 euros per month. Couple with two 53,842 € Food is a relatively low cost in relation to total dependant children Couple with three or more depedant children 47,326 € Woman living alone 20,097 € Man living alone 25,567 € Other type of household 41,309 € Total 36,774 €

Average monthly consumption of South Tyrol households; distribution as a percentage

Housing, water, electricity 33.8 % Rent 20.6 % Food and non-alcoholic drinks 14.9 % Transport expenses 10.7 % Accommodation and food services 7.4% Recreation, entertainment and cultural actvities 7.3 % Goods and services 7.1 % Furniture and household goods and services 5.0 % Healthcare 5.0 % Clothing and footwear 4.4 % Communication 2.1 % Alcoholic drinks and tobacco 1.8 % Extraordinary maintenance % 1.2 Source Istat 2015 Education 0.5 % ©2019 WIFO % 0 % 5 % 10 15 % 35 % 25 % 30 % 20 % JOBS

EMPLOYMENT in South Tyrol

A classmate of Elsa’s is interested in a job in 2016, 77% were employees. A feature of South in South Tyrol and asks her what the ratio Tyrol’s labour market is its high seasonality: between supply and demand on South in agriculture, tourism and the construction Tyrol’s labour market is compared to other industry, the demand for labour is high for just European countries and regions. some months of the year, while it drops during 09 other periods. The labour market has proven to be one of the strengths of South Tyrol’s economy, even during the worldwide recession2 from 2007 to 2009. The employment rate in South Tyrol is EMPLOYMENT AND around 73.5%; this means that three-quarters UNEMPLOYMENT RATES of the population aged between 15 and 64 years European comparison actively participate in working life. The rate of unemployment was 2.9% in 2016 and was Countries Employment Unemploy- slightly lower than in the years before. rate ment rate While 100 years ago the primary sector still European Union 73.2 % 6.8 % predominated in South Tyrol, today just under Germany 79.9 % 3.4 % three-quarters of the workforce work in the Austria 76.2 % 4.9 % service sector. The majority of women work in Italy 63.0 % 10.6 % the tertiary sector. Of the 281,800 people in work Trentino 68.2 % 4.8 % South Tyrol 73.5 % 2.9 %

EMPLOYMENT PATTERN IN SOUTH TYROL Development 1941 - 2016

100 % 90 % AGRICULTURE 80 % MANUFACTURING 70 % 60 % 50 % 40 % 30 % 20 % SERVICES DIENSTLEISTUNGEN 10 % 0 %

1941 1951 1961 1971 1981 1991 2001 2011 2016

Elsa wonders how economic production is means that more goods and services have been measured and whether this level actually produced, and as a result, income and wealth corresponds with the level of quality of life. have risen. GDP however, is a critical indicator of a country’s economic prosperity; as GDP rises 10 A very important parameter for assessing so does consumption, but generally speaking the “health status” of an economy is its gross pollution and the negative effects on people domestic product (GDP), in other words, the also increase. value of everything that a country or region produces over the course of a year. For example, Today GDP in South Tyrol stands at 22.3 billion an increase in GDP over the previous year euros. GDP per capita, which is calculated by dividing the total GDP by the number of inhabitants, is 42,900 euros. In order to make GDP/CAPITA comparisons with other regions and countries, Comparison of EU regions the GDP per capita must be considered in

no data relation to the cost of living: a low GDP per under EU average capita is placed in perspective when the costs of EU average housing, food and electricity are in line with it 20% above EU average (see purchasing power parity) more than 25% above EU average

SÜDTIROLGDP PER CAPITA IN PPP 36European’981 € comparison Source Eurostat 2017 ©2019 WIFO South Tyrol 42,900 € Tyrol 40,900 € Germany 37,100 € European Union 30,000 € Italy 28,900 € 0 10,000 30,000 50,000 20,000 40,000 Source Eurostat 2018 ©2019 WIFO

PURCHASING POWER PARITY (PPP) is a virtual currency that allows income levels to be compared taking into account the different costs of living. South Tyrol: 45% above European average GDP … OVER 40% OF SOUTH TYROLEANS LIVE AND MORE IN ONE OF THE 7 MUNICIPALITIES WITH A POPULATION OF OVER 10,000? THESE ACCOUNT FOR ONLY 4.5% OF THE REGION’S TOTAL AREA.

Did you know that …

Ciao!

…THE FREE UNIVERSITY Hallo! … BHUTAN IS THE ONLY COUNTRY IN THE OF BOLZANO/BOZEN IS WORLD THAT DOES NOT USE GDP BUT THE FIRST TRI-LINGUAL THE “GROSS DOMESTIC HAPPINESS INDEX” UNIVERSITY IN EUROPE? AS A KEY ECONOMIC INDICATOR? THIS IS Hi! BASED ON FOUR FUNDAMENTAL PILLARS: SUSTAINABLE SOCIAL DEVELOPMENT, 11 ECOLOGICAL SUSTAINABILITY, PROMOTION OF CULTURAL VALUES AND GOOD GOVERNANCE. … THE BIRTH RATE OF SOUTH TYROL AT 1.7 CHILDREN PER WOMAN OF CHILD-BEARING AGE IS THE HIGHEST IN ITALY? ... THE EMPLOYMENT RATE OF SOUTH TYROL IS CURRENTLY 73.5%? THIS MEANS THAT ALMOST THREE QUARTERS OF THE POPULATION AGED BETWEEN 15 AND 64 YEARS ACTIVELY PARTICIPATE IN WORKING LIFE.

To Do TASKS

1 ) Every year Bolzano/Bozen ranks amongst the top cities in Italy for quality of life. It is also however an expensive city; prices in the property and food sectors in particular are very high. Consider the consequences of these and give some examples from your own personal experience.

2) GDP as a measure of wealth is often criti- cised for describing quantitative but not qua- litative development. Consider the advantages and disadvantages of using GDP as an indicator of prosperity. BUSINESS

South Tyrol’s BUSINESSES

In order to find out how many businesses 3% are other forms, such as cooperatives. operate in South Tyrol, Elsa asks the A business in South Tyrol employs on average Chamber of Commerce of Bolzano/Bozen for 4.6 people (as dependent employees). This information. In Italy every business must be figure results from a structure based on small 12 registered in the Commercial Register3. businesses, especially in agriculture and hospitality. Businesses with a maximum of In 2018, there were 58,454 businesses one employee represent more than half of registered, 13,545 of which are operating inthe all business enterprises. In the rest of Italy manufacturing sector and 16,707 are farming and Austria, the proportion of these micro- businesses. The difference between entries businesses is lower. and deletions depends to a great extent on the general economic climate. For example, in the In South Tyrol around one in five enterprises is early 1990s the difference was negative. The “female”. Enterprises are referred to as “female” year 2018 ended with a slightly positive balance when women are owners in sole proprietorships, (3,109 companies were registered and 3,063 form the majority of shareholders in private were deleted). companies and hold the majority of the share capital5 and/or make up the majority of If you look at their legal forms4, the majority of administrators in corporations. The proportion South Tyrol’s businesses are sole proprietorships of women in management positions is about (61%), 18% are private companies and 18% one quarter. incorporated companies, while the remaining

DEVELOPMENT OF BUSINESSES in South Tyrol (excluding agriculture)

45,000

40,000 7 % Other sectors 35,000 26 % Services 30,000

25,000 18 % Hotels and restaurants 20,000

15,000 20 % Commerce

10,000 16% Construction 5000 13 % Manufacturing 0

MANUFACTORING Structure

To measure EMPLOYMENT, we can calculate the number of full-time equivalents (FTEs), i.e. the number of people working full-time for an entire year. Workers who have not worked all year or have worked part- In order to find out how South Tyrol’s time can be converted into full-time economy is structured, Elsa looks at where equivalents. For example, a part-time and in which sectors domestic businesses employee (50%) is counted as half a operate. unit of full-time work. 13 If we consider businesses in South Tyrol in terms of their geographical structure, then 20% are located in the Burgraviato/Burggrafenamt BUSINESSES IN SOUTH TYROL and Bolzano/Bozen districts and 15% in the according to district

Oltradige Bassa Atesina/Überetsch-Unterland District Businesses Proportion and in the Val Pusteria/Pustertal respectively. Val Venosta/Vinschgau 4,386 7.5 % In order to understand the manufacturing Burgraviato/Burggrafenamt 11,469 19.6 % structure, it makes sense to consider its Oltradige Bassa Atesina/Überetsch-Unterland 8,945 15.3 % proportion of the workforce. For example, 14% Bolzano/Bozen 11,371 19.5 % of the workforce works in commerce. Salto-Sciliar/Salten-Schlern 6,311 10.8 % Valle Isarco/Eisacktal 5,112 8.8 % Alta Valle Isarco/Wipptal 1,949 3.3 % Val Pusteria/Pustertal 8,911 15.2 % South Tyrol 58,454 100 %

EMPLOYMENT IN SOUTH TYROL according to economic sector

25 % 24 %

20 % 20 %

15 % 12 % 14 % 15 %

10 % 8 % 7 %

GROWTH FACTORS

During her research, Elsa learns that How digital is South Tyrol? productivity is a key driver of economic The use of information and communication growth. Growth in GDP may derive from higher technology (ICT) in business activities has employment, improved labour productivity, or become a decisive factor in a company’s 14 from a combination of these two factors. competitiveness. More than 86% of businesses have their own website. In addition, around In 2016, labour productivity6 (added value half of businesses use at least one social per hour worked) in South Tyrol amounted network (for example, Facebook, Instagram, to 40.5 euros while in Italy it was 35.5 euros. Twitter, YouTube) as a further, innovative One of the factors in remaining competitive communication channel. and maintaining constant productivity lies, amongst other things, in the promotion of innovative entrepreneurial forces, research and RATES OF INVESTMENT IN R & D development and the acquisition of know-how. European comparison

How innovative is South Tyrol? Euros per inhabitant New ideas only become innovations when they are translated into products, services and South Tyrol 290 € processes and are used successfully on the Italy 382 € market. Innovation is essential to ensuring the Germany 1,122 € competitiveness of businesses, both in terms of EU 599 €

production efficiency and the attractiveness of 0 200 400 600 800 the product range (goods or services) offered to 1,000 1,200 customers. At the same time, it is an extremely Source Eurostat 2016 ©2019 WIFO important factor in economic growth as it enables per capita income to grow, and as a result, the standard of living of the population, by improving productivity. The small size of many of South Tyrol’s businesses does not allow for significant investment in research USE OF WEBSITES AND SOCIAL MEDIA and development (R & D). One way to improve in businesses with minimum of 10 employees this situation is through cooperation between businesses or between businesses and research institutes. Sector Website Social media

Manufacturing 94.6 % 49.4 % Energy supply 75.0 % 22.0 % Building industry 81.5 % 33.9 % Services 84.4 % 70.7 % Total 85.7 % 60.4 %

Elsa would like to show her classmates how and beverages are the most important goods many goods from South Tyrol are exported and account for almost to Germany; she therefore analyses one fifth of total imports. In second place come the business relations of South Tyrol’s metals and metal products and in third place companies. machines and mechanical equipment. As with 15 exports, Germany and Austria are also the most In 2017 around 2,800 businesses in South Tyrol important trading partners for imports. exported goods, 1,915 of which for a value of more than 10,000 euros. The largest trading FOREIGN TRADE IN SOUTH TYROL partner is Germany. Followed by Austria, according to country (in thousands of euros) Switzerland and France. An analysis of the categories of products exported reveals that Country Exports Imports up until last year, food and beverages were the Germany 1,632,212 2,114,396 most exported products. In 2018 the turnover Austria 498,384 1,019,798 for these amounted to around 850 Millions Switzerland 251,826 51,979 euros. The turnover for the export of food and France 249,255 235,251 beverages was exceeded in 2018 by exported USA 192,510 39,283 machinery and mechanical equipment, such as Spain 150,773 109,735 lift systems, which amounted to913 Millions Sweden 149,532 40,374 euros. In third place came means of transport UK 139,338 67,305 (vehicles). As far as imports are concerned, food Netherlands 135,903 232,163 China 73,781 104,272 Other countries 1,357,323 771,334 Total 4,830,887 4,815,890

25 % Other goods 12 % Agricultural products

18 % Food 14 % Means of transport

19 % Machines 12 % Metal products

1 ) Start-ups are frequently established to put Did you know an innovative business idea into practice. that … Think of an idea for setting up a new business in South Tyrol.

2) Search for information on IDM Südtirol-Alto Adige and in particular how this organisation as- sists businesses in South Tyrol in the process of internationalisation.

… … IN 2018 EXPORTS FROM 3 ) The term “globalisation” results from the SOUTH TYROL EXCEEDED combination of the terms “global economy” and “integration” and defines a phenomenon 4.8 BILLION EUROS? of worldwide significance. An example? Elsa buys a dress in a shop in Bolzano/Bozen. The 16 dress however was made in a factory in Po- land, which processes fabrics from India. The dress design is the work of a studio in Paris, while the advertising campaign was carried out by a German photographer. How is globalisation changing consumer ha- ... 40% OF BUSINESSES WITH bits in South Tyrol? MORE THAN 10 EMPLOYEES IN SOUTH TYROL MAKE ONLINE PURCHASES AND MORE THAN 30% SELL ONLINE?

… SOUTH TYROL’S ECONOMY IS CHARACTERISED BY A LARGE NUMBER OF SMALL BUSINESSES? 92.7% OF BUSINESSES HAVE LESS THAN 10 EMPLOYEES. THESE ACCOUNT FOR 40.5% OF TOTAL EMPLOYMENT. AGRI- CULTURE PRIMARY Sector

Elsa lives in a rural area and knows that As South Tyrol is predominantly mountainous, agriculture has always been of great only a very small part of the area can be used importance to South Tyrol due to the fruit for agriculture. Livestock are reared and milk and wine industry and the farmers who rear is produced in the higher regions, whilst on the livestock and farm the fields. valley floor fruit and winegrowing predominate. 17 In terms of the way land is used, 88% is covered The activities belonging to the primary sector by meadows and pastures while the area used are those that historically were the first to be for growing vegetables and cereals is just under practised by man, hence the term “primary”. 2%. Since South Tyrol is located on the south This sector includes agriculture, livestock side of the Alps, it enjoys a mild climate, which is rearing and forestry. particularly favourable to winegrowing.

AGRICULTURALLY VIABLE LAND according to designated use 1.7 % arable land

0.1 % householdgardens

61.1 % 26.9 % 10.2 % pastures meadows wood crops

Source ASTAT 2010 AGRICULTURE Businesses 16,707 Change in the period 2013-2018 - 0.75 % Persons employed (FTEs) 14,900 Added value per hour worked 21.24 €

AGRICULTURE LIVESTOCK REARING In the early 20th century, agriculture Products deriving from livestock rearing represented the most important branch of represent the second most important South Tyrol‘s economy and still today provides agricultural sector after fruit growing. Annual 18 work for a large number of people. However, for milk production alone amounts to 407 million many farmers, farming is no longer their main kilogrammes, almost 14 million of which activity, hence they are known as sideline- through organic farming methods. In contrast, farmers. About half of these have a second job meat production plays a minor role. Even the in other sectors of the economy. The share of number of animals fattened is decreasing. agriculture in the province’s GDP is 5%. In South Tyrol there are almost 17,000 agricultural and WINEGROWING forestry businesses: more than half of these are Wine is also a typical product of South Tyrol. smaller than five hectares, as many as one fifth Since the area set aside for winegrowing is has an area of less than one hectare. Between limited (about 5,400 hectares), production is 2000 and 2010, both the number of farms and relatively low. Moreover, increasingly more the amount of land farmed has declined. The emphasis is placed on quality than on quantity. principle product is apples: a total of about one Another current trend in winegrowing favours million tons of apples are harvested each year. white wines: white wine grapes of various About 5% of Europe’s total apple production varieties are grown on over 60% of area under comes from South Tyrol. vine. About a third of the wine produced is sold on the local market, just under 40% is marketed in the rest of Italy and the remaining wine is exported.

BREAKDOWN OF ADDED VALUE in the agricultural sector

4 % Other

36 % Livestock rearing

48 % Fruit growing 12 % Winegrowing

One of Elsa’s classmates is very enterprising and wants to start up a business in South Tyrol. He is particularly interested in the secondary sector. Elsa therefore verifies what the main areas of activity are. 19

The secondary sector consists of the manufacturing industry, energy supply and the construction industry. In 2018 approximately 59,300 people, that is more than one fifth of South Tyrol’s workforce, worked in the over 12,000 businesses in the secondary sector. Of these, 35,200 worked in the manufacturing sector, 3,000 in the energy and environment sector and 21,100 in the construction industry.

BREAKDOWN OF THE WORKFORCE in the secondary sector

5 % Energy and environment

59 % Manufacturing and mining

36 % Construction

Source Istat 2016 ©2019 WIFO Craft activities (eg. carpenters) fall within the secondary sector or are counted as services (eg. hairdressers). In South Tyrol there are 13,545 craft businesses, which are often very small.

MANUFACTURING INDUSTRY CONSTRUCTION The manufacturing industry includes all Construction involves planning and activities for the processing of primary products constructing buildings and infrastructure into goods intended for consumption or to be (roads, bridges, hydraulic engineering, etc.). 20 used in the production of other goods. In recent It includes all activities involved in erecting, decades, various companies in South Tyrol have altering, repairing or demolishing a building. specialised in the sectors of Alpine technology The fitting out of the interiors (plumbers, tilers, and in the food industry. etc.) is also part of this industry. South Tyrol’s construction companies work primarily on the ENERGY local market and provide work for 7.5% of the In the field of electricity, South Tyrol’s average workforce in South Tyrol. annual production is sufficient to cover its annual requirements. 92% of electricity is produced by the numerous hydroelectric power stations.

MANUFACTURING INDUSTRY AND ENERGY Companies 5,266

Change in the period 2013-2018 + 8.6 % Persons employed (FTEs) 38,200 Added value per hour worked 52.41 €

CONSTRUCTION

Companies 6,754

Change in the period 2013-2018 - 0.7 % Persons employed (FTEs) 21,100 Added value per hour worked 34.46 €

TRADE AND SERVICES TERTIARY Sector

While agriculture produces raw materials the threshold of 70% (including public and the secondary sector processes them, administration, commerce and hospitality). the tertiary sector provides services. Elsa In total, 207,600 people are employed in the examines how South Tyrol has changed over tertiary sector in South Tyrol. the last decades to become a service society. The tertiary sector can be divided into two 21 large categories: market oriented services The tertiary sector consists of economic (these include commerce, hospitality, business activities that provide services for households services, information, communication), and and businesses. In this respect, South Tyrol non-market oriented services (activities such as reflects the international trend. Whereas in state education, justice, defence, public health 1940 only a third of the workforce worked in and general public administration services) the tertiary sector, today we have exceeded .

BREAKDOWN OF WORKFORCE % Information in the tertiary sector 2

18 % Other services 18 % Tourism

4 % Finance, insurance 5 % Transport and real estate

8 % Public administration

20 % Commerce

% Health 11 4 % Company services 11 % Education

Source Istat 2016 ©2019 WIFO The development of e-commerce, also known as online trade, is constantly on the increase. The South Tyrol Consumer Centre and Chamber of Commerce in Bolzano/Bozen provide a free platform www.conciliareonline.it which allows disputes connected to e-commerce purchases to be settled online.

TRADE Trade involves the buying and selling of goods Almost 23,000 people provide services for and can be divided into two categories: wholesale businesses, for example auditors, advisers trade (the purpose of which is to ensure the flow or cleaning companies. The remainder of 22 of goods between manufacturers and traders) the people working in the service sector are and retail trade (whose job it is to sell products spread across the transport sector (eg. freight to the end consumer). forwarders), the financial, insurance and real estate sectors (banks, intermediaries, Trading businesses provide about 42,300 jobs insurance companies) and the information and in South Tyrol and employ about one fifth of communications sector (newspapers, radio and the people working in the tertiary sector. Due telecommunications). Lastly, there are personal to its geographical location, Bolzano/Bozen services, such as beauty care. has always been an important trading city, you only have to think of the importance of Almost 60,000 people work in one of the primary its trade fairs. South Tyrol is therefore said to public sectors, that is, in education, healthcare have a bridging function, which is performed by or in the public administration. wholesalers, but is however asymmetrical: the brokerage of goods from the European market to the Italian one is greater than the brokerage TRADE SERVICES of Italian products to other countries in Europe. The retail trade also plays an important role Businesses 8,286 in South Tyrol. Since the population of South Tyrol is scattered throughout the region, a local Change in the period 2013-2018 supply gives people the opportunity to buy food - 4.5 % and important consumer goods locally or in the Persons employed (FTEs) immediate vicinity. 42,300 Added value per hour worked SERVICES 32.69 € Services that come within the tertiary sector are very wide ranging. According to whether it is a private person or a company using the PRIVATE SERVICES services, these are provided to the public and households, businesses or the public sector. Businesses 11,033 Change in the period 2013-2018 + 8.1 % Persons employed (FTEs) 67,100 Added value per hour worked 41.28 € TOURISM

HOTELS AND RESTAURANTS Businesses 7,543 Change in the period 2013-2018 + 1.5 % Persons employed (FTEs) 38,400 Added value per hour worked 29.62 €

TOURISM According to the official classification, tourism Tourism is one of the driving forces behind covers activities involved in providing accom- South Tyrol’s economy, in more than 10,000 modation (hotels, guest houses) and food servi- accommodation facilities, 224,000 beds are 23 ces (bars, restaurants). available to tourists. The majority of foreign holidaymakers come from German-speaking Around 1800, the first spas and health resorts countries, in other words, Germany, Austria began to develop in South Tyrol, including and Switzerland. In recent years, however, Merano/Meran and Gries, from the 1950s significant increases in overnight stays of onwards, tourism began to recover from the guests from countries further afield, such as aftermath of the war and today South Tyrol, the United States, have also been recorded. with its 33.2 million overnight stays per year records a high tourism intensity7.

OVERNIGHT STAYS according to nationality

Number of Average length Country overnight stays of stay (days)

Germany 16,179,250 5.0 Italy 10,411,015 4.0 Switzerland 1,606,487 4.3 Austria 1,071,952 3.0 Netherlands 618,031 4.7 Belgium 385,154 5.4 Czech Republic 345,370 4.4 Poland 325,179 5.6 Other countries 2,294,509 4.4 Total 33,236,947 4.4

Overnight stays/inhabitants

South Tyrol 62 Tyrol 33 Trentino 50 Veneto 14 Tuscany 12 0 10 70 30 50 20 60 40

In comparison to coastal areas, South Tyrol, ACCOMMODATION CAPACITY like other areas in the Alps, has the advantage according to type of accommodation that high season is not limited to a few months in the summer. There are two tourism seasons, Accomodation Number 24 with August holding the absolute record: in Facility Category of beds 2018, more than 5.7 million overnight stays 5-star 3,196 were counted in this month alone. Tourism also 4-star 32,929 contributes to the success of other sectors, such 3-star as retail. Just think that each guest spends on Hospitality 66,462 establishments average around 120 euros per day on board and 2-star 22,634 lodging, shopping, transport and services. 1-star 5,897 Apartment 21,224 Campsites 12,993

Non-hospitality Private 23,474 establishments Farm holidays 24,800 Others 11,011 Total 224,618

WINTER/SUMMER SEASON 2017-2018 Number of overnight stays

6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 July May June April March August October January February December November September

Source ASTAT tourism year 2017/2018 ©2019 WIFO … SOUTH TYROL IS THE LARGEST APPLE GROWING AREA IN THE WHOLE OF EUROPE? ALMOST ONE MILLION TONS OF APPLES ARE HARVESTED YEARLY, THAT IS AROUND 5% OF THE EUROPEAN HARVEST. Did you know that...

To Do … IN SOUTH TYROL 19 TASKS RESTAURANTS HAVE BEEN AWARDED A TOTAL OF 26 MICHELIN STARS. 1 ) The funds that South Tyrol companies make available for research and development are below the European average. In terms ...IN 2005 THE CASACLIMA/KLIMAHAUS WAS of GDP, only 0.75% is spent on research and INVITED BY THE UN TO THE 11TH WORLD development. This figure is still a long way from the EU target of 3%. 25 CLIMATE CONFERENCE IN MONTREAL TO What measures would you suggest for the PRESENT ITS ACTIVITIES AS AN EXAMPLE promotion of research and development OF CONCRETE SUSTAINABLE PROTECTION activities? OF THE ENVIRONMENT? 2) The project “umbrella brand” is used for the promotion of South Tyrol as a tourist destination as well as for the marketing of typical South Tyrol products. What are the advantages of using a …THAT THE WORLD’S LARGEST standardised identification system for local SKI NETWORK IS PARTIALLY products and services? LOCATED IN SOUTH TYROL? DOLOMITI SUPERSKI COVERS 1,200 KILOMETERS OF SKI RUNS.

… 99 % OF SOUTH TYROL WINES HAVE IGT OR DOC CERTIFICATION (CONTROLLED DESIGNATION OF ORGIN). AROUND 20 DIFFERENT VARIETIES ARE CULTIVATED ON 5,400 HECTARES.

IN SOUTH TYROL A TOTAL OF 128,00O HEAD OF CATT- LE ARE KEPT, 66,600 OF WHICH ARE DAIRY COWS. COMPETI- TIVENESS Challenges for the FUTURE

OPPORTUNITIES… ... AND CHALLENGES

In recent decades South Tyrol has experienced In the future South Tyrol will need to focus an impressive development process, which even more on sustainable growth. With regard has transformed an economically weak region to education, the intention is to bring young into an affluent one with a stable economy. people into contact with the economy at an early South Tyrol today occupies a leading position stage through practical/work experience and in numerous Italian and European rankings, other initiatives offered through the schools. 26 including employment, quality of life and Another factor to consider is the ageing of GDP per capita. In education, the dual training the population, which requires a rethink of system has reached a high standard of quality. products and services for citizens. On the other Moreover, conditions in general for companies hand, it is important that businesses remain are relatively favourable. This is also due to the competitive despite the small scale of their advantageous geographical location and the operations. It is therefore essential to strengthen multi-lingual population, which enables the co-operation between micro businesses, wholesale trade to provide its bridging function. which often do not have the capability or In addition, South Tyrol’s decentralised resources to address internationalisation economic structure and a local supply of goods and innovation by themselves. Innovation in enable it to respond efficiently to the needs of the particular is one of the main drivers of growth population. The attractiveness of South Tyrol to in the economy and is therefore crucial to tourists is due to the beautiful Alpine landscape ensuring long-term sustainable development and hence a reason why the environment for our society. Research and development are must be protected. This also guarantees a high necessary in order to continue to survive on a quality of life for the inhabitants. Although market characterized by increasingly strong not very large in number, high-tech companies competition. At the same time protection of the enjoy considerable success at home and abroad, environment poses a challenge, but given its especially in the areas of renewable energy positive effects on agriculture and tourism, it and Alpine technology. Another important also provides an opportunity for the economy. growth factor is exports: this opens up new South Tyrol has set itself the objective of sales opportunities, which ensure income and becoming a model region for sustainable alpine economic prosperity throughout South Tyrol. mobility by 2030. It is therefore important, both at individual and collective level, to strive towards preserving economic prosperity in South Tyrol for the future.

SOFT SKILLS SUSTAINABILITY DIGITALIZATION COMPETI- TIVENESS

GLOSSARY

1 MARKET ECONOMY In this economic system, exchange processes on the markets are regulated by the price mechanism. The State creates the conditions to guarantee competition between market players without restricting their freedom of action. Source: Gablers Wirtschaftslexikon

² RECESSION A recession occurs when the production of a country and hence its GDP perform negatively in comparison with the previous year. A recession is therefore the opposite of economic growth – a downturn in the economy. Source: Italian Stock Exchange 27 3 BUSINESS REGISTER The Chamber of Commerce keeps a public electronic register in which all businesses based in South Tyrol must be registered. Source: Chamber of Commerce Bolzano/Bozen

4 LEGAL FORM The legal form indicates how a business is structured and organised. The entrepreneur can operate alone (sole proprietorship) or together with partners (company). In addition to partnerships or capital companies, there are other forms, such as co-operatives. The legal form has legal as well as financial consequences for the business (for example, its liability in the event of bankruptcy). Source: Chamber of Commerce Bolzano/Bozen

5 SHARE CAPITAL The share capital represents the capital contributions and assets contributed by shareholders as risk capital when a company is formed. Source: Italian Stock Exchange

6 LABOUR PRODUCTIVITY Labour productivity measures the ratio between product (output) and labour (input) that arises during production. It is measured in terms of added value per worker or per hour worked. Source: Chamber of Commerce Bolzano/Bozen

7 TOURISM INTENSITY The tourism intensity index is the ratio of the number of overnight stays in tourist establishments in a specific region relative to the resident population. Source: ASTAT The IER – Institute for Economic Research of the Chamber of Commerce analyses and researches the economy in South Tyrol and provides information on it to businesses, associations, political decision makers, the media and schools. IER’s main aim when working with young people is to provide them with information about business, arouse their interest in economics and encourage entrepreneurial thinking.

IN FOCUS is a collection of educational materials for business education at South Tyrol upper secondary schools, colleges and vocational training schools. The individual modules can be obtained free of charge here: www.wifo.bz.it/infocus [email protected] +39 0471 94 57 07

IMPRINT

Publisher Drafting Chamber of Commerce, Industry, Crafts IER - Institute for Economic Research of and Agriculture Bolzano/Bozen the Chamber of Commerce Bolzano/Bozen, Südtiroler Straße 60,39100 Bolzano/Bozen

Director Design Dr. Alfred Aberer freiraum.bz.it Approved by the Regional Court Decree 3/99 Printing and other distribution – even partial – permitted only with indi- Published in the academic year 2019/20 cation of source (publisher and title)