At its front door is the Adriatic Sea and an express lane to world markets. At its back door is central-eastern Europe and a market of 120 million people. Companies alert to rising stars will find profitable opportunities for serving the enlarged Europe in Trieste's strategic geopolitical position.
	Supplement to Site Selection

For centuries, Trieste was the emporium of the Austro-Hungarian Empire. In its heyday as a major international trading post, people from everywhere swarmed into the city, richening its culture and quality of life. More importantly, this attractive city between the Alps and the Adriatic adopted the open-mindedness that serves it so well today.

The history lesson points out that Trieste has long been a world player. Today, it stars in a strategic role as a bridge between the developed markets of western Europe and the emerging economies to the east. This multi-cultural city of 224,000 population occupies a crossroads position at the head of the Adriatic Sea, the closest shipping lane to the heart of Europe. It is a major destination on the Barcelona-Trieste-Budapest trade and communications route and Europe's closest launching pad to African, Middle East and Far East markets.

Area Science Park, one of the foremost multidisciplinary science parks in Europe.

Geopolitical Position

Site selection experts agree that the number one criterion for establishing a facility abroad is proximity to market. Trieste, in Italy's economically active Northeast, has excellent European Union and worldwide connections. More importantly, in terms of market strategy, Trieste borders on the eastern European country of Slovenia and has well-established links to the other fast-growing emerging economies in the east.

A few facts suggest the strength of those links:

• The Northeast, which produces 15 percent of the Italian GDP, generates over 30 percent of the national trade surplus with the central and eastern European countries.
• Some 400 import/export firms in Trieste specialize in trading with the central and eastern European countries, and this experience can be tapped by foreign companies seeking to do business in eastern markets.
• In retail trade, Trieste is the shopping mall for Slovenians and Croatians who, by the hundreds, come to the city each day, bringing with them their Deutschmarks and dollars to buy goods unavailable in the east. Ten percent of the city's permanent population is Slavic. Trieste's stock exchange quotes in Austrian shillings, central and eastern Europe currencies and Russian rubles.

"We really have two cultures," says Trieste Mayor Riccardo Illy, "the Italian or western European one and the central/ eastern Europe one."

Trieste's geopolitical position becomes more important in light of recent events to expand the European Common Market. When Hungary, Slovenia and the Czech Republic come into the fold, the focal point of Europe takes a decided shift to the east. A look at a map of Europe shows that Trieste will be in almost the exact center of the enlarged European market.

Any place in the city is roughly a half hour from the Slovenian border. Shippers can promise delivery to either Slovenia or Hungary within six hours.

"Some of the central and eastern European countries have done quite well in recent years," says Domenico Romeo, head of the consortium for the Area Science Park. "Their GDP is increasing at a rate of four to five percent a year. But it will take some time before they adapt themselves to western-style economies, and Trieste can provide the stable platform companies need to do business in eastern Europe."

Trieste also wears the mantle of political acceptance as the focal point for eastern Europe relations. The secretariat for the Central European Initiative, which now encompasses 15 countries, is in Trieste. The Italian government, the European Commission, the United Nations and the governments of eastern Europe acknowledge that Trieste is the gathering point for collaborations with the East. It was Trieste's insistence that brought approval for Slovenia to join the European Common Market. And it was Trieste's pressure that got an agreement signed for a massive road/rail project (Corridor 5 of the Pan-European Transportation System) that will do much to improve access to the East. (See map on page 3.)

Two Strong Pillars

Trieste rests on two strong economic pillars: its concentration of research institutions and its port. It may seem an unlikely combination -- one denoting massive industrial muscle and the other a well-developed cerebral capacity. Yet the two pillars converge to underpin Trieste's international reputation for excellence.

If there is one facility that sets the image for Trieste it is its Area Science Park. Here, over 800 world-class scientists and engineers feed Trieste's international environment in a rich complex of 40 research centers and labs. Trieste hosts several units of the Experimental Geophysics Laboratory; the Astronomy Observatory; the Marine Biology Laboratory; and the Miramare Marine Park.

These influential national and international research units network with the 25,000-student University of Trieste, with its numerous post-graduate courses; and the International School for Advanced Studies, with doctorate programs in such fields as physics, mathematics, biophysics and molecular biology.

The crown jewel of the Area Science Park is the Synchrotron Light Laboratory "Elettra," which produces soft X-rays of exceptional quality. These allow studies of the surface of metals, or chemical reactions or pharmaceutical products. In the future, it will be used in micromechanics and microelectronics research. It has space for 40 beam lines, enough for companies to have their own lines. One major interest is from pharmaceutical companies analyzing the three-dimensional structure of protein crystals.

Beginning in the spring of 1997, another beam line will specialize in the production of micro devices (less than .1 millimeters).

The Elettra Laboratory is one of the very few such facilities in the world. Others are at such science centers as Grenoble and Berkeley.

In the Area Science Park, companies will find state of the art facilities for production, promotion and launching new products and technologies.

After achieving a solid reputation as a center of pure scientific research, Area Science Park is evolving to commercialization of the research and the entry of companies.

"In the 1990s, after attracting the synchrotron, the International Center for Genetic Engineering and Biotechnology, and some national research institutions," says Romeo, "we started creating new enterprises as spin-offs. The next step is to attract R&D labs and high tech centers for international companies to bring the fruits of research to the marketplace."

Companies will find wide-open opportunities for collaboration with the research centers in the park. There are no restrictions on foreign companies using the research facilities in the park or the Synchrotron's Elettra Laboratory.

Labs and offices of external companies will be attracted to the science park by its advanced instrumentation and the chance to rub shoulders with world leaders in many scientific fields. A location in the park is also a great opportunity for companies to increase their visibility.

Says Romeo, "If biotech companies, for example, come to Trieste they will have a lot of opportunity for collaboration. They will find the best biologists, the best protein engineers and the best specialists in bioinformatics. The environment is similar (though not to the same scale) as one would find at MIT in Boston."

The science park provides access to technicians, instrumentation and informatics equipment, as well as financial help, all critical factors for the start-up companies now budding in the park.

"We can support the spin-offs until they can stand on their own feet financially in a variety of ways," says Romeo. "For example, the group of physicists who formed a company to develop microscopes is financially assisted by the park. When they operate in a protected environment like the science park they receive assistance."

Plans call for the 130-acre park to develop on a further 300 acres. At that time, it will be possible for companies to build their own facilities in the science park. Rights to the land can be transferred to private companies.

Area Science Park can offer consultancy for companies interested in Trieste, whether they locate in the park or not.

As in industry and commerce, there are strong international links at the Area Science Park. Those working in the park represent 25 nationalities, from eastern Europe as well as Asia, Africa and Latin America.

There is also a long tradition of cooperation in scientific activities between Trieste researchers and those of eastern Europe. In the Cold War, for example, scientists in the former USSR were able to get passports to visit Trieste within 24 hours of request in order to take courses or to give lectures in theoretical physics. "Cooperation among Trieste's scientists and those of eastern Europe has been strong for 35 years," says Romeo.

Researchers in the Science Park have long worked with companies in eastern Europe in technology areas. For example, Eures, a software company, has established a joint venture with a company in Croatia. Another software company has a subsidiary in Bucharest, Romania, and the several centers of the science park have strong links with the Slovak Academy of Sciences. The International Center for Genetic Engineering and Biotechnology, established by the United Nations in the 1980s, became independent about two years ago and is organizing an international network of affiliated units. The Moscow team affiliated with the center has moved en masse to Trieste because of its nurturing environment for scientists.

A Privileged Gate

The second pillar supporting Trieste's economy is its port. Trieste opens its front door on the Adriatic Sea, accepting trade from virtually every continent. The well-appointed port and duty-free zones bolster the city's strategic position to serve both the European Union and central-eastern Europe.

Trieste is the second deepest port in the Mediterranean (after Marseilles). With a draft of 20 meters, the port can accept at its piers aircraft carriers that at other ports must stay in open water, or the latest generation of giant "globetrotter" container ships.

In terms of cargo, Trieste is the seventh busiest port in Europe, handling 42 million tonnes a year. It is Italy's second port but is closing fast on Genoa.

As the Free Port is outside EEC customs territory, goods placed in storage and destined for third countries need not be declared to domestic or Community customs authorities. These goods maintain their foreign origin until they are imported into Italian or Community customs territory. The Free Zone guarantees exemption from customs duties for such activities as storage, handling, trade and processing of goods.

Special terms are granted on oil and electric power consumption; fiscal surcharges on energy costs for export products are refunded to the producer.

The Port of Trieste handles Europe's greatest volume of traffic in coffee and citrus fruit, is one of the most important transit points for cotton, timber and oil and has a significant role in container traffic. Middle East oil is piped to Germany, Austria and Poland from the port. Specialty distribution centers include a permanent depot for the sale of Brazilian coffee, the China Arts and Crafts depot, a non-ferrous metals depot, rubber depot, Australian wool depot, Israeli fruit distribution center, and a transshipment point for coal destined to power stations in northern Italy. The Port of Trieste is also attractive to Middle East shippers -- it is closer by 2,000 miles than any other European port.

The Old Free Port, built in the last century, is still used for livestock, multipurpose cargoes and ro-ro traffic.

The New Free Port's Pier 7 container terminal, one of the most modern facilities on the Mediterranean, is the terminus of the motorway and railway network that connects Trieste to EU and central European markets, enabling goods to reach their destinations in competitive times. An expansion doubled the pier's capacity, bringing in four new portainer cranes and six transtainers.

In recent years, Trieste has become the third largest port for metal exchange in Europe, after Rotterdam and Antwerp. Roughly 150,000 tonnes of nonferrous metals (aluminum, copper, lead, nickel) coming from the Black Sea, Bulgaria, Romania and the former Yugoslavia are traded on the London markets. One indication of the reliability and security of the port is the fact that the metals, stored in bonded warehouses, are worth hundreds of millions of dollars.

Trieste has more warehouses than all other Italian ports combined, a legacy of its role as the trading gateway for the Austrian Empire. This is a point of interest for foreign investors, since there is plenty of room to store goods for a wide geographic area.

Federico Pacorini of the logistics company B. Pacorini explains the advantages: "For some products Trieste is a privileged gate to the United Europe. But soon Slovenia, Hungary and the Czech Republic will join the common market, and trade with the east will rise. By having a central warehouse in Trieste to supply many countries you gain the advantages of economies of scale and reduced costs. So you benefit from one unique logistic location. In addition, the eastern countries are very weak financially and you can never be sure they have the capacity to pay. You have to wait for letters of credit, which then need to be confirmed by an accepted bank. If you have goods in Trieste and you have received a valid letter of credit or cash, you can deliver in 12 hours or less and give an immediate response to the customer."

There is another very important reason shippers like the Port of Trieste. For metals and general cargoes Trieste is the only customs facility in Europe with special tax treatment for imports into the EU. Payment of duties and VAT can be suspended until six months after import. This is a unique situation in Europe and one that's very relevant for exporters from the Far East and the Americas, which ship high-value cargo, like electronics, into Europe.

Three simple examples illustrate the benefits. Say a telephone is imported into Italy and sold. The buyer pays the price of the telephone, the duty and VAT to the importer. The importer pays the taxes to customs officials six months later, with the cost of the credit being very low compared to what commercial banks charge.

In another example, a company operating in Italy brings in parts from a non-EU country. To obtain the favorable tariff treatments available when shipping the product into the European Union, the product will have to be assembled in the free port and the percentage of foreign parts must be less than 50 percent of the value of the product. This makes it a "Made in Italy" product.

In a third example, a company ships foreign parts into Trieste and assembles the product there. The cost of the labor is 25 percent of the total product cost. The company pays duty only on the 75 percent of the value that is of non-EU origin and would pay it six months after it is sold.

These benefits of Trieste customs have been in force before Italy reclaimed Trieste and before the European Union was established in the 1950s. They were thus hard-coded into European Union legislation and cannot be rescinded.

The world's most beautiful -- and biggest -- passenger ships are built near Trieste. Among customers are P&O and Disney.

A special zone at the port is set aside for industrial activities. EZIT (Ente per la Zona Industriale di Trieste) is one of the largest industrial parks in Europe, covering about 3,000 acres (1,250 hectares) and 120 million sq. ft. (11.1 million sq.m.) of space. Six million sq. ft. of space is totally infrastructured and ready to use.

Over 8,000 workers find employment at the park's 400 companies.

The industrial park is in the free port, where goods can be produced, assembled and processed without payment of duty until they leave the zone.

The park has its own industrial port, which is separate from the commercial port. A separate ship channel serves the industrial area.

EZIT can enter into buying and selling transactions for land or ready-to-use factories, leasebacks and concessions (leases) at highly favorable rates. Land allotments are extremely prompt. It is usually possible to build on over 50 percent of the assigned area. The premises built in the industrial area are exempt from the urbanization charges payable to municipalities.

The industrial zone and ports have all the infrastructure necessary for manufacturing and logistics -- a methane pipeline for energy requirements, sewage treatment system and 45 miles (75km) of railroad track which is integrated into the domestic and international rail network. Recently an elevated road opened in the port area connecting port terminals with the European roadway system. All piers at the port are being privatized.

Given its first-class infrastructure, the port could handle much more traffic. Plans are being laid to make Trieste the hub port of the eastern Mediterranean for greater traffic between Trieste, Austria and the Eastern European countries.