Italy

According to the Ministry of Defence, in 2015, defence expenditure for staff increased by 1.6%, while that for training (Operational related costs), was reduced by 14%. As announced, the 2016 Defence budget will be about €20 billion; 77% will be allocated to Personnel, 9% to Operational related costs and 11% to Investment (See chart below). The latter will decrease to below €2 billion (for the first time since 2006), in 2017.

 

The Italian Aerospace & Defence (A&D) Industry, through acquisitions/mergers and the development of commercial high-tech products, has evolved into an Industry with global projections, since the early 2000s. Having a turnover of €15.3 billion in 2016 the Italian A&D Industry ranks today 4th in Europe and 7th worldwide. Capable of producing high-tech products, the A&D sector affects other industries –including nanotechnology, new materials, microelectronics and communication, while playing a leading role in the economy of the country.

Nowadays, the sector employs some 50,000 people, while 15% of its turnover is reinvested in R&D activities.

Despite the global drop in related exports, taking advantage of the economic crisis and the fact that France and Germany have seen significant falls in their respective arms exports, Italy managed to increase its market share worldwide, to about 3% in the last 5 years, and hence rank as the 8th largest Arms exporter worldwide, over the period 2011-2015.

The total arms exports for 2015, reached US $571 million (€513 million) and included Aircraft (US $418 million), Sensors (US $75 million), Naval weapons (US $38 million), as well as Armoured vehicles and Missiles (each worth US $20 million).

The major importers of Italian weaponry over the period 2005-2015, have been Peru (US $ 754 million), UAE (US $430 million), Turkey (US $422 million), India (US $375 million) and the US (US$ 336 million).

Apart from SIPRI we can also source information about defence exports from the annual document published by the Italian House of representatives, which quantifies and analyses the country’s defence exports. According to it, Italian defence exports almost doubled in 2016, as licenses for exports released to Italian firms were worth a total of €14.6 billion, a huge leap from the €7.9 billion recorded the previous year.

The document lists Leonardo-Finmeccanica, as top exporter in 2016, with a €11.6 billion, or 79.3% share, followed by GE AVIO S.R.L. at €985.3 million, or 6.76%, and RWM Italia on €489.6 million, or 3.36%. Kuwait is the top destination, with €7.7 billion in export licences granted, followed by UK with €2.4 billion and Germany with €1.07 billion. The high level of exports in Europe are due to the fact the compilers of the data include licenses for supplying components for international programs such as the Eurofighter, in which Italy, Germany and the UK are partners.

According to 2014 Sipri data, five Italian companies were among the top 100 Arms companies worldwide. These included Finmeccanica, AgustaWestland, Selex SpA, Alenia Aermacchi (now part of Leonardo) and finally the shipbuilding company, Fincantieri.

Italian Top arms-producing & military services  companies

Arms sales, 2014 (in US $ Bn.)

Total sales, 2014 (in US $ Bn.)

Arm sales %, 2014

Total Employment, 2014

Finmeccanica

10.5

19.5

54

54,380

AgustaWestland (Finmeccanica)

3.5

5.8

60

12,850

Selex ES SpA (Finmeccanica)

2.1

2.7

78

19,160

Alenia Aermacchi (Finmeccanica)

2.0

4.2

47

10,930

Fincantieri

1.4

5.8

24

21,960

Source: http://books.sipri.org

Having a production network of 21 shipyards, 3 design centres, a research centre and two production sites for manufacturing of systems and mechanical components, Fincantieri focuses on the design and construction of ships of a high technological level, such as merchant and naval vessels, offshore and mega yachts. Moreover, it actively participates (or has participated) in major European co-funded research projects, such as SAFEDOR, MC/WAP (fuel cells), INTERSHIP, ECOMOS (exhaust fumes optimization) and SIS-PRECODE (protection of marine structures).

In 2014, Finmeccanica was the 9th largest defence contractor in the world, while in 2015 the company had a €13 billion turnover. To further promote its interests and increase its profits, in April 2016, after a series of mergers & acquisitions that took place, Finmeccanica was transformed from a financial holding company, to an operational, integrated and innovative industrial entity; to define this change, the new giant defence firm was renamed Leonardo (See Infographic below).

Source: http://www.leonardocompany.com

It is worth noting that the latest contract signed, between Leonardo and the Kuwaiti Ministry of Defence, for the supply of 28 Eurofighter Typhoon, will have a significant impact on the prime contractor’s figures, increasing Leonardo’s revenues by €2 billion per year, from 2017 onwards.

Finally, Italy has made great efforts on developing related activities in new markets, as that of UAS (Unmanned Aerial Systems). It is indicative that Piaggio Aerospace managed to land a €316 million contract -with the General Headquarters of the United Arab Emirates Armed Force (GHQ) and Abu Dhabi Autonomous Systems Investments (ADASI) - for the design and development of eight P1HH HammerHead multipurpose UAVs.

Realising that critical autonomy must be matched with economic sustainability, in an effort to maintain the efficiency of vehicles and equipment of the Armed Forces, the Agency of the Defence Industry, was created some years ago. Operating under a streamlined, efficient and result-oriented organization, the Ministry of Defence is committed to provide information related to its procurement requirements and the Agency (performing management functions), provides estimates and feasibility reports, based on market prices, as well as quality products and services, under specification agreements. In addition, the Agency of the Defence Industry and the Government, are focused on the production facilities’ transformation, for the execution of public-private partnership projects, through the development of a more effective rationale behind procurement procedures, while establishing partnerships with private sector manufacturers and suppliers.

In fact, today most of the maintenance and technical support activities related to the needs of the Armed Forces, are managed by manufacturers and firms that specialize in these sectors.

Moreover, recognising that Italy will be able to meet its needs at a national level, only within a defence system that promotes the industrial and technological interdependence, as well as participation in multinational development and acquisition initiatives, Italian Defence focuses on the collaboration of the different industrial sectors, as well as participation in European and NATO projects and initiatives.

Considering that the Aerospace & Defence (A&D) Industry, is a pillar of technological and manufacturing advancements, as well as of employability and economic growth, in order to remain a respected, with a leading role, member in the international community, Italy has to respond quickly to the global trends -including partnership policies, technology transfer, ‘inter-governmental agreements’, as well as ‘Pool & Share’ policies.

In order to strengthen its integration with European partners and contribute towards the growth of the nation, Italy has already turned to the development of advanced technologies (through the development or acquisition of new technological skills). In this respect, the cooperation of Defence, Industry and Academia are imperative. Towards this direction, the Italian Government supports the funding of highly specialized SMEs and start-ups, for the creation of an industrial platform based on specialised applications, products and processes, to respond effectively to the demands of foreign markets.

Finally, within a climate of limited economic resources, to increase the competitive advantage of Italian A&D Industry globally, initiatives towards the enhancement of trade relations, as well as technological cooperation, with the US, Canada and the UAE, have been developed in recent years. These also include the participation of the Industry to international exhibitions and workshops, under the supervision/with the consultation of industry associations, such as the AIAD (the Italian Industries Federation for Aerospace, Defence and Security).