16 March 2016, Global Connections

How Italy can become more attractive for foreign investment

Within an increasingly complex international framework, there has been an upswing of inflows and outflows of FDI in Italy.

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Within an increasingly complex international framework, in 2013 there has been an upswing of inflows and outflows of FDI (Foreign Direct Investments) in Italy - as explained in the recent ICE (Italian Foreign Trade Institute) report “Italia multinazionale 2014”. In detail, investments grew from $0.09 billion in 2012 to $17 billion in 2013, with a further increase to over $20 billion expected in 2014 and another strong acceleration estimated for 2015. However, Italy's internationalization is still much lower than that of other major European Countries.

According to a Bank of Italy report on FDI, Italy compared to its main peers in the Eurozone (Germany and France) is “behind the schedule” both as originator of FDI (with a 2.4% of the world total, versus a 7% of Germany and France - 2011 figures), both as destination with just 1.6% of the world stocks against 4.7% of France and 3.5% of Germany. Furthermore, according to the ICE report analysis, in 2013 investment projects towards Italy were down to 0.8% of the world total, compared to a 1% average level in 2009-2013 and a 1.4% in 2004-2008. This is especially true when it comes to the “best” investments - the so-called “greenfield” investments - which are in constant decrease, due to new attractive destinations and to the low competitiveness of the Italian Peninsula. Internal regional imbalances are also huge: in Southern Italy and part of Central Italy international investment are almost down to zero, while Lombardy Region alone (in Northern Italy) is attracting almost half of the total investments in the Country.

The ICE report underlines also that investments are now looking for new destinations. Despite lagging or decreasing inflows from North America and Europe - which remain the main investors in Italy - the ICE report shows a strong growth of investments from the "emerging multinationals" based in China, India, Russia and in other Asian Countries. In Europe, Countries capable of attracting investments are those with a strong economic and institutional profile (like Germany, the UK and the Netherlands) or those that have been able to recover quickly from the Eurozone crisis (Spain). The French position remains contradictory, while Italy has a long way to go, not only compared to other major Western nations, but also to the EU-27 average.

The reasons for this gap between our Country and other advanced economies are well-known - a slow and costly bureaucracy, scandals, corruptions - and require strong structural resolutions: reforms of the Public Administration, justice, taxes, employment, an overall infrastructural improvement as well as a greater commitment to nurture those resources and skills that represent Italy's distinctive strengths.

Incisive and smart interventions would allow unlocking the unexpressed potentiality of Italy - which is enormous and potentially highly profitable. If there is one Country where conditions for investment can actually improve, that is Italy: in addition to long-term stability, with a public finance under control, sustainable growth driven by structural reforms, we are seeing an overall improvement of the business environment.

We must accelerate the step change, to facilitate the inflow of new quality foreign investments. These would also allow the improvement of our scientific, technological and management skills, especially in the areas of high technology and advanced services, triggering a virtuous circle able to re-launch the Italian economy.

We must accelerate the step change, to facilitate the inflow of new quality foreign investments. These would also allow the improvement of our scientific, technological and management skills, especially in the areas of high technology and advanced services, triggering a virtuous circle able to re-launch the Italian economy.

Marzio Perrelli, CEO HSBC Italy

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