IR Global – Meet the Members – Italy

Innovative Italy tastes FDI success

Italy is an easy choice for international investors looking for a foothold in Europe or further expansion across the continent. It combines world famous cultural heritage with beautiful scenery and a Mediterranean climate.

Aside from these more obvious assets, Italy is also one of the economic powerhouses of Europe. With a gross domestic product (GDP) of more than 1.7 trillion euros and a population of over 60 million people, it is the world’s ninth largest economy and the fourth largest in Europe.

Italy is the second largest manufacturer in Europe and the ninth largest exporter in the world, sending EUR500 billion of goods and services abroad on an annual basis. It has world-respected industries in automotive, fashion and pharmaceuticals among others.

Despite these impressive numbers, Italy has been hampered by allegations of corruption and lack of transparency in its political system and government departments. In response to this, the country has undergone a series of self-imposed reforms in an attempt to win back the full respect of the international business community.
The reforms have worked, and Italy is now ranked tenth globally and fifth in the EU, by the 2018 A.T. Kearney Foreign Direct Investment(FDI) Confidence Index. It rises three spots from 2017 and is now ahead of The Netherlands and Sweden. This is an impressive achievement for a country that could not make the top 25 just five years ago.

The A.T. Kearney report suggests that ‘localisation’, or the practice of shifting a company’s management, operations, production, or marketing to local markets, has become an in vogue international business strategy.
Italy has tried to take advantage of this trend, with the introduction of its Industria 4.0 initiative, a national plan for innovation launched in January 2017. The initiative puts an emphasis on manufacturing, and it returns industrial policy to the top of the government’s agenda. The plan offers support to improve competitiveness, digitise new processes, boost productivity, promote new skills, and ultimately attract more foreign investment.
Recent figures from the Italian Trade Agency (ITA) show that this initiative is already starting to take effect, placing Italy fifth in Europe for inward FDI investment flows in 2017 (USD17 billion). Companies owned by foreign investors now employ more than 1.2 million people in Italy, with 500,000 of those in manufacturing.

An investment opportunities report from ITA highlights the powerful economic clusters within Italy’s regions that are proving so attractive to FDI.
The aerospace cluster in Piedmont consists of 280 small and medium-sized enterprises (SMEs) and employs 14,800 people. It generates EUR3.9 billion of turnover and is responsible for 17 per cent of national exports.
The cluster also includes 200 private and public research and development (R&D) centres, seven innovation hubs and four science and technology parks. The Piedmont region ranks first in Italy for private investment in R&D, and third for hi-tech patents.

As another example, Tuscany is one of the world’s leading regions for research into vaccines, oncology, cardiovascular, neurology, bio-robotics and biomaterials. The Pharma cluster in Tuscany consists of 370 life sciences firms employing 19,000 people (42 pharma, 80 biotech, 120 medical devices and 128 software and services). It is responsible for EUR8 billion of turnover and 7.5 per cent of regional GDP.
This is complemented by a similar level of success in Lombardy, where the research heavy areas of biotech and biomed are receiving substantial investment. There are 816 biomedical enterprises in the region, employing more than 40 per cent of Lombardy’s health industry workforce.

Much of this regional success is down to the government’s innovative approach to attracting FDI, as evidenced by the Industria 4.0 initiative. In this report you will hear from Italian professionals with expertise in various areas of law. We include articles that explain in more detail some of the personal and corporate tax advantages available to foreign investors interested in Italy, and we also explore the critical issues that must be understood once the decision to invest is made, such as efficient corporate governance and effective due diligence.