Italy: Investing

FDI in Figures

Compared to its European neighbors, Italy attracts little foreign direct investment (FDI) but nevertheless ranks 15th among global receivers of FDI. After a dip in 2008 due to the global financial crisis, FDI inflows picked up again in 2009. Opportunities for investment were created due to the country’s privatization program and liberalization in the energy sector and telecommunications market. However, strict work policies, high taxes, inefficient public services, corruption, and organized crime continue to pose a hindrance to investment.

Foreign Direct Investment	2008	2009	2010
FDI Inward Flow (million USD)	17,031	20,073	9,498
FDI Stock (million USD)	339,927	364,427	337,401
Performance Index*, Ranking on 141 Economies	126	96	-
Potential Index**, Ranking on 141 Economies	32	-	-
Number of Greenfield Investments***	223	166	-
FDI Inwards (in % of GFCF****)	3.6	28.0	-
FDI Stock (in % of GDP)	14.8	18.6	-

Source: UNCTAD - Last Available Data.

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

FDI Inflows By Countries and Industry

Main Investing Countries	2007, in %
Luxembourg	22.1
France	15.7
Netherlands	14.1
United Kingdom	9.1
Germany	8.4
United States	5.5
Belgium	4.0
Switzerland	4.0
Spain	4.0

Main Invested Sectors	2007, in %
Financial intermediation	26.9
Manufacturing sector	23.2
Trade and repairs	13.8
Real estate, renting and business activities	7.6
Transport, storage and communications	5.2

Source: OECD Stats Extracts - Last Available Data.

Main Foreign Companies: In 2004, the UNCTAD counted 1 843 foreign companies in Italy (i.e. companies, at least 10% of whose capital is held by a foreign entity).
Sources of Statistics: Invitalia (Italian agency for investment promotion)

Why You Should Choose to Invest in Italy

Strong Points: Thanks to the State withdrawal, the market is opening up to competition in several sectors (energy, telephone, etc.). The SME grouping allows for great capacity for adaptation. Italy also has a qualified work force (technical knowledge and high quality production).
Entrepreneurs are creative and innovative.
Weak Points: The procedural costs, slow administration processes, red tape and financial scandals do not encourage investments. In some regions, infrastructures are poor, especially in the south of the country.
Government Measures to Motivate or Restrict FDI: Thereis hardly any assistance in Italy for promoting foreign investment. This trend is reinforced by the European Union which wants Italy to harmonize its tax incentives with the Community regulations. Italy only promotes the development of its regions which are in difficulty, in order to facilitate SME activity and job creation. The defense sector and other sectors likely to compromise public safety are not open to foreign investors.
The Italian Institute for Foreign Trade lists and makes available a guide to aids for setting up business in Italy.

Protection of Foreign Investment

Bilateral Investment Conventions Signed By Italy: Italy has signed bilateral agreements with fifty or so countries.
To see the list of countries, click here.
To see the conventions, click here.
Organizations Offering Their Assistance in Case of Disagreement: ICCWBO , International court of arbitration, International chamber of commerce
ICSID , International Center for settlement of Investment Disputes
Member of the Multilateral Investment Guarantee Agency: Italy is a signatory to the MIGA Convention.

Country Comparison For the Protection of Investors

	Italy	OECD	United States	Germany
Index of Transaction Transparency*	7.0	6.0	7.0	5.0
Index of Manager’s Responsibility**	4.0	5.2	9.0	5.0
Index of Shareholders’ Power***	6.0	6.8	9.0	5.0
Index of Investor Protection****	5.7	6.0	8.3	5.0

Source: Doing Business - Last Available Data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

Procedures Relative to Foreign Investment

Freedom of Establishment: As a member of the European Union, Italy applies the principle of freedom of establishment and non-discrimination. Thus, foreign investors can carry out any type of activity in the same conditions as a local investor. In addition, no specific legal text governs foreign direct investment. The regime is in alignment with that applicable to local investment.
Acquisition of Holdings: Acquiring a majority holding in the capital of a local company is authorized in Italy, except in certain sectors (petroleum exploitation).
Obligation to Declare: The agency for the promotion of foreign investment in the country gives information about the authorizations necessary for setting up business.
Requests For Specific Authorizations: Foreign investors are subject to particular measures (prior authorization issued by the competent ministry and restrictions concerning the permitted amount of equity acquisitions) in certain sectors only:
- telecommunications and the press;
- airline and shipping companies;
- electricity and gas (liberalized in 1999 and in 2000 by respective legal decrees n° 79/99 and n° 167/00);
- petroleum exploitation.
For further information, consult the ICE website.

Office Real Estate and Land Ownership

The Possibility of Buying Land and Industrial and Commercial Buildings: Foreign investors can become the owners of land on which they set up their business. However, acquiring real estate must be carried out through companies set up specifically for this.
For further information, consult the agencies specialized in the real estate sector (for example Pirelli RE or Gabetti).
Risk of Expropriation: The Italian constitution allows private property to be expropriated for public purposes and compensation is provided.

Investment Aid

Forms of Aid: The various regional aids granted to companies concern the regions of the Mezzogiorno (south of Rome, in Sardinia and Sicily). Eligible projects must enable existing companies to be modernized and developed, new technologies to be integrated and/or local resources to be exploited. In addition, companies created in this area in order to develop a new industrial activity (outside sectors of activity in decline), may be exempted from corporate tax (composed of two taxes) for 10 years. Profits made in Italy and re-invested in the Mezzogiorno are exempted from part of the corporate tax. Finally, aid for research and development can be granted by the Ministry of Industry, the Institute of Industrial production and the Ministry of Universities and Scientific and Technological Research.
The Italian Institute for Foreign Trade lists and makes available a guide to aids for setting up business in Italy.
Privileged Domains: Aid for research and development can be granted by the Ministry of Industry, the Institute of Industrial production and the Ministry of Universities and Scientific and Technological Research.
A new initiative of the Italian government will make it possible to attract new investment to Tuscany in many sectors linked to information and communication technologies (ICT).
Privileged Geographical Zones: The State favors investment in certain regions. There are aids for the creation of companies in the less developed regions (principally in the regions of southern Italy). For example, the Abruzzo region can benefit from State aid in accordance with the dispensation provided for in art. 92.3 c of the Treaty of Rome.
Various regional aids are granted to companies who have set up business in the Mezzogiorno (southern Italy, beginning south of Rome, in Sardinia and Sicily). Their projects must enable existing companies to be modernized and developed, new technologies to be integrated and local resources to be exploited. In addition, companies created in this area in order to develop a new industrial activity (outside sectors of activity in decline), may be exempted from corporate tax (composed of two taxes) for 10 years. Profits made in Italy and re-invested in the Mezzogiorno are exempted from part of the corporate tax.
Free Zones: Trieste and Venice
Organizations Which Finance: Ministry of Economic Development.

Investment Opportunities

The Key Sectors of the National Economy: Italy has a very large presence in the aerospace sector (it is a leading producer of helicopters, a partner in the project for the construction of the international space station, etc.).
In the automobile sector, Italy distinguishes itself in design, technology and skills, with avant-garde research centers. The automobile market is in constant expansion, and is more and more appreciated by foreign manufacturers.

The Italian chemical industry is one of the country's most dynamic sectors (with a strong propensity for innovation, highly qualified human resources and large multinationals who have chosen the peninsula to set up their business). Italy is the third-largest European producer in the chemical sector and an prominent actor on the world stage. In a country where volumes of production and consumption of agri-food products and beverages are the largest in Europe, tradition and innovation create new opportunities to conquer new foreign markets. The country is characterized by a tradition of typical products, culinary dishes and wines well-known all over the world, and very high-level standards of quality and safety.

Italy has many investment opportunities in new technologies: nanotechnologies, biotechnologies, high tech products, etc. Italy also enjoys a favorable and stimulating environment to develop Life Science projects (competitive costs, simple standards, search for excellence). Italy is also a logistical platform for international trade, with new investments and the best transport and telecommunications infrastructures around the Mediterranean. Finally, Italy is the fourth most-popular tourist destination in the world, an industry worth around 70 billion euros a year.
High Potential Sectors: Energy.
Privatization Programs: Airline companies, railways.
Tenders, Projects and Public Procurement: Ted - Tenders Electronic daily, Business opportunities in EU 27
DgMarket, Tenders Worldwide

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors: Defense, tobacco, energy networks.
Sectors in Decline: Metallurgy, textiles.

Finding Assistance For Further Information

Investment Aid Agency: Institute for foreign trade (ICE)
Other Useful Resources: Confindustria
Invest in Italy
Doing Business Guides: The Lexmundi « Doing Business » guide to Italy
The Deloitte "International Tax and Business Guide" to Italy
Italy Commercial Guide 2010 - Buy USA

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