What makes Italy attractive?
Ministry of Economy and Finance
June 4, 2014
2
Export-oriented industry
Sound private sector
balance sheet
Strategic position
Strong manufacturing sector
Entrepreneurship and
high skills
Numerous reforms
undertaken
Key international player
Wide range of opportunities
Solid stock market
Increasingly flexible
labour market
Dynamic small and
medium enterprises
Italy’s strengths OVERVIEW
What makes Italy attractive?
Italy in the global context
G8 member, the fifth manufacturing economy worldwide and
the third largest one in Euro Area.
Strong exports (almost €500bn of exports of goods and
services) and great presence in high-growth sectors
(robotics, mechatronics, biopharma, aerospace), not only the
Four Fs (Food, Fashion, Furniture, Ferrari).
One of the founders of the European Union and an active
player in the international scene.
A hinge-country between Europe and the Mediterranean and
Middle East regions.
3
KEY INTERNATIONAL PLAYER
What makes Italy attractive?
4
A strong manufacturing culture
STRONG MANUFACTURING SECTOR
Source: ISTAT
What makes Italy attractive?
Agriculture &
Fishing Manufacturing Services
Weight of the
Area
North West 1.2 20.9 69.9 32.4
North East 2.2 22.5 67.5 23.1
Center 1.5 11.5 78.8 21.6
South &Islands 3.4 8.9 78.7 22.8
Value added – 2011 (%, current prices)
5
The 4th largest manufacturing sector per capita
STRONG MANUFACTURING SECTOR
Per capita industrial production
(current US$, 2012)
Source: Intesa Sanpaolo, Centro Studi Confindustria on national sources and Global Insight
What makes Italy attractive?
0
5000
10000
15000
20000
25000
30000
35000
Germany Japan SouthKorea
Italy France UnitedStates
Russia Brazil China India
6
Industry switching to mid-tech specialisation STRONG MANUFACTURING SECTOR
The evolution of Italian trade balance structure
What makes Italy attractive?
28,4 24,5 31,1
9,1 18,1
27,4 21.7
33.0
55.3
-6,3 -14,2
-7,6
-30
-10
10
30
50
70
90
110
1997 2007 2013
Eu
ro b
n
High Medium - High
Medium - Low Low
Source: Calculation on ISTAT data
7
Technology clusters boost firms’ performance STRONG MANUFACTURING SECTOR
144 districts. Topography (2008-2012):
12.709 firms
45.2% are exporting firms
Turnover increased over 20%
for 24.6% of business
22 districts specialising in high-tech
sectors in 2011: out of 9 in ICT, 5 in
aeronautics, 4 in biotech and
pharmaceuticals by each sector.
Source: Intesa Sanpaolo,“Economia e Finanza dei distretti industriali”, Annual Report, No. 6, December 2013.
What makes Italy attractive?
Food
Machinery
Home system
Fashion system
Other sectors
8
Trade surplus leadership in the world EXPORT-ORIENTED INDUSTRY
What makes Italy attractive?
-800 -600 -400 -200 0 200 400 600 800 1000
US -610
UK -99
France -34
Italy 113
S. Korea 205
Japan 292
Germany 394
China 866
Bn dollars Source: WTO
Manufacturing trade surplus,
(2012, >100 Bn dollars)
9
Italy’s export market shares are resilient EXPORT-ORIENTED INDUSTRY
What makes Italy attractive?
13,5
9,3 10,2
5,3
3,6 3,0
3,7 3,3
1,9
3,2
0
2
4
6
8
10
12
14
16C
hin
a
Ge
rma
ny
US
A
Ja
pa
n
So
uth
Ko
rea
Ca
na
da
Fra
nce
Ita
ly
Spain
UK
%
Source: Calculation on UN-Comtrade data
2003 2012
10
Trade surplus leadership EXPORT-ORIENTED INDUSTRY
Note: The ranking is within the 5.117 world manufacturing.
Source: Fortis-Corradini Index, Fondazione Edison Analysis, May 2014
Italy – 2012 World Trade
surplus Ranking
Number of Products
(HS 1996)
First 235
Second 377
Third 323
Total 935
What makes Italy attractive?
11
Italy: 54% of export within Europe EXPORT ORIENTED INDUSTRY
Source: ISTAT
Italy is an export-led
economy; European
countries are the
leading trading partners.
Italy’s imports are
sizeable due to the lack
of oil, gas and raw
materials.
Top 10 - Leading trading partners (% of total exports)
What makes Italy attractive?
2000 2010 2012 2013
Germany 15.2 13.0 12.5 12.4
France 12.7 11.6 11.1 10.8
US 10.2 6.0 6.8 6.9
OPEC 3.3 5.3 5.7 6.0
Switzerland 3.3 4.7 5.9 5.2
UK 6.9 5.2 4.9 5.0
Spain 6.3 5.8 4.7 4.4
Russia 1.0 2.3 2.6 2.8
Turkey 1.8 2.4 2.7 2.6
China 0.9 2.6 2.3 2.5
Redirection of exports to more dynamic countries
12
EXPORT-ORIENTED INDUSTRY
Italy ranks first among world
exporters of clothing, textiles
and leather products and…
… second in non-electronic
machinery, basic
manufactures and
miscellaneous manufacturing. (Source: UNCTAD/WTO, Trade Performance Index 2012).
Source: Calculation on ISTAT and World Bank data.
Note: Export share are calculated as a ratio on Italy’s nominal GDP,
for 27 countries and a minimum export share by 1%.
What makes Italy attractive?
-.8
-.6
-.4
-.2
.0
.2
.4
.6
.8
Absolu
te c
hange o
f th
e s
hare
, %
valu
es
0 40 80 120 160 200 240
Growth of real GDP, % values
Regression line (correlation coefficient = 0.46)
Export and economic growth in main countries
(years 2000-2012)
Openness to trade
13
STRATEGIC POSITION
Around 6,500 km of motorways and 21.500
km of national roads; one of the most
developed freight village systems in Europe.
Links to European key connection systems.
21 trade ports with international line services,
263 ports scattered along 8.122 km of
coastline.
Second most important country in Europe for
maritime freight transport: 3 ports are
classified in the Top 20 of European container
ports in 2012: Gioia Tauro, Genoa and La
Spezia.
First EU country in maritime transport of
passengers with around 82mn passengers in
2011.
International ports, logistics
platforms and interports
Source: INVITALIA
What makes Italy attractive?
Boosting infrastructure activity
A tax credit is introduced together with an exemption from
concession fees to encourage public-private partnership for
infrastructure projects in excess of €200mn.
New measures to speed up use of Structural Funds
(Commissioner ad acta, specific task forces and a National
Cohesion Agency).
14
STRATEGIC POSITION: NEW MEASURES TO SUPPORT INFRASTRUCTURE PROJECTS
What makes Italy attractive?
Refinancing and support for infrastructure projects
€2bn over 2013–2017 to finance infrastructure projects for
regional motorways, railways maintenance, construction of
new underground lines and school buildings maintenance.
€300mn for road safety involving redevelopment of bridges,
viaducts, road tunnels.
Ports: abolition of the tax on small boats, simplification in
dredging procedures, reshaping of port taxes, more financial
autonomy for safety and maintenance works of ports.
15
STRATEGIC POSITION: NEW MEASURES TO SUPPORT INFRASTRUCTURE PROJECTS
What makes Italy attractive?
16
Small is beautiful but … DYNAMIC SMALL AND MEDIUM ENTERPRISES
≈ 3,900 businesses with total revenues ranging
from €15mn to €330mn.
≈ 400 businesses with total revenues ranging from
€331mn to €3bn.
Higher revenue growth with exports equal to 40-
50% of total revenues.
Good profitability and solid balance sheets.
Account for about 50% of total Italian
manufacturing value added.
Large Italian companies account for only 8.4% of
total manufacturing value added and the
subsidiaries of foreign companies for 13%.
Source: Exagon, Mediobanca IV Capitalism, Area Studi Mediobanca and Centro Studi Unioncamere
What makes Italy attractive?
17
… Italian companies need scale to compete DYNAMIC SMALL AND MEDIUM ENTERPRISES
What makes Italy attractive?
Firm size in manufacturing - 2011
All companies Companies with at least 10
employees
Companies with at least 250
employees
Number of
firms
Average firm
size
Share of
firms %
Average firm
size
Share of
firms %
Average firm
size
Italy 425,481 9.2 17.2 28.2 0.3 718.1
France 206,998 14.8 14.3 41.6 0.7 840.8
Germany 207,847 34.3 36.7 38.0 2.0 908.5
Spain 182,162 10.6 17.1 31.5 0.4 680.9
Source: Eurostat, Structural Business Statistics
Entrepreneurial culture and high labour skills
18
ENTREPRENEURSHIP AND HIGH SKILLS
The Italian production network is based on strong
entrepreneurial culture (4 mn entrepreneurs), high quality
products in many economic sectors and export-oriented
attitude.
Italy ranks 2nd in Europe in terms of manufacturing
companies with a skilled workforce, which in turn
contributes to the high quality of Made-in-Italy products.
High skills gained with on-the-job training and closely
related to traditional craftsmanship, not well captured by
international statistics.
What makes Italy attractive?
Extend the maximum duration of fixed-term
employment contracts without
causality requirement
from 12 to 36 months
Fixed-term contracts
limited to 20% of total
workforce. The limit can be waived by collective
agreements
Fixed-term
contracts can be
extended up to 5 times in
36 months
Apprenticeship contracts must be in writing. Simplification
for public training in
businesses
Compensation to apprentices equal to 35%
of the compensation outlined in the national labour
agreement
Electronic communication for Documento
Unico di Regolarità
Contributiva (DURC –
Social Security Compliance Certificate)
INCREASINGLY FLEXIBLE LABOUR MARKET
PURPOSE
Reduce rigidities and streamline the labour market, encouraging the use of flexible
contracts for young people entering the labour market.
Fixed-term employment and apprenticeship contracts
TIMELINE
March 2014
What makes Italy attractive?
Young people (ages 15-29) can access, via an ICT platform, a network of customised services on training, employment
orientation and job opportunities
9 action fronts: i) reception; ii) training targeted to finding work placement; iii)
orientation; iv) apprenticeship; v) traineeship; vi) civil service; vii) support to
self-employment and entrepreneurship; viii) professional mobility; ix) employment
bonus. These measures will be included in the “Youth Guarantee” National Operational
Programme
Monitoring of implementation and financing
of the individual measures through
performance indicators
INCREASINGLY FLEXIBLE LABOUR MARKET
PURPOSE
Ensure that all young people receive an offer of good-quality employment, apprenticeship or
training offer within four months of leaving formal education or becoming unemployed.
Implementation of Italy’s ‘Youth Guarantee’ Plan
TIMELINE
May 2014
What makes Italy attractive?
Streamline existing incentives for hiring
workers and those for self-employment and the establishment of own companies and establishment of a
National Employment Agency
Streamline entities and structures operating in
the realm of safety-nets, active policies
and employment services and upgrading
of public/private partnerships
Universal maternity benefit and social
security contributions for
working mothers in quasi-dependent
employment
Tax credit for female workers and encourage employers to
provide integrated child-
care services
INCREASINGLY FLEXIBLE LABOUR MARKET
PURPOSE
Ensure that users can benefit from essential services relating to active labour market
policies across the national territory. Achieving work-life balance as a parent.
Employment services, active labour policies and work-life balance
TIMELINE
September 2014
What makes Italy attractive?
Streamline existing incentives for hiring
workers and those for self-employment and the establishment of own companies and establishment of a
National Employment Agency
Streamline entities and structures operating in
the realm of safety-nets, active policies
and employment services and upgrading
of public/private partnerships
Universal maternity benefit and social
security contributions for
working mothers in quasi-dependent
employment
Tax credit for female workers and encourage employers to
provide integrated child-
care services
INCREASINGLY FLEXIBLE LABOUR MARKET
PURPOSE
Ensure that users can benefit from essential services relating to active labour market
policies across the national territory. Achieving work-life balance as a parent.
Employment services, active labour policies and work-life balance
TIMELINE
September 2014
What makes Italy attractive?
Italy is one of least indebted countries
23
SOUND PRIVATE SECTOR BALANCE SHEET
What makes Italy attractive?
Aggregate debt
0
50
100
150
200
250
300
350
400
450
Germany 195%
US 264%
Spain 305%
Japan 412%
UK 284%
Italy 261%
France 255%
% o
f G
DP
Note: 2012 data for private debt; 2013 data for public debt.
Source: Bank of Italy
24
SOUND PRIVATE SECTOR BALANCE SHEET
Debt-to-income ratio among the lowest
Source: Eurostat, 2012 data. Note: Gross debt-to-income ratio of households is defined as loans (AF4), liabilities
divided by gross disposable income (B6G) with the latter being adjusted for the
change in the net equity of households in pension funds reserves (D8net). Non-
consolidated figures.
Households Non financial corporations
Source: Eurostat, 2012 data. Note: Debt includes loans and securities other than shares. Non-
consolidated figures.
What makes Italy attractive?
0
50
100
150
200
250
300
SK
SL
LV IT EE
FR
AT
BE
EA
-17 FI
PT
ES
LU IR NL
DE
LT
PO
HU
CZ
UK
SW DK
% o
f D
isp
osab
le i
nco
me
euro area
non-euro area
0
10
20
30
40
50
60
FR
SL FI
BE
NL
DE
AT
EA
-17
PT
LU
EE IT ES IR LV
SK
LT
PO
HU
CZ
UK
SW DK
% o
f G
ross o
pera
tin
g s
urp
lus
euro area non-euro area
Household debt-to-income ratio among the lowest in the EU
Households’ debt
(% of gross disposable income)
Households’ wealth
(Households’ wealth/gross
disposable income ratio)
25
10
30
50
70
90
110
130
2000 2002 2004 2006 2008 2010 2012
DE FR
IT EA
Source: Bank of Italy, Eurostat
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
2000 2002 2004 2006 2008 2010 2012
DE FR
IT EA
SOUND PRIVATE SECTOR BALANCE SHEET
What makes Italy attractive?
26
Italian households’ wealth and its components
SOUND PRIVATE SECTOR BALANCE SHEET
Note: Preliminarly estimates for the first half of 2013.
Source: Bank of Italy, ‘La ricchezza delle famiglie italiane’, Anno XXIII, n.65, December 12, 2013
What makes Italy attractive?
Eu
ro m
illio
n
Net Wealth
(8.542 mln in 2012)
Financial
Assets
(38.9% in 2012)
Real
Estate
(56.6 % in 2012)
Real
Assets
(61.1 % in 2012)
Financial
Liabilities
(9.5% in 2012)
Net wealth of
households is 7.8
times their
disposable income
(8.3 UK, 8.1 FR, 7.7
JP, and 5.3 US).
FTSE MIB: Corporate Italy
27
SOLID STOCK MARKET
Stock market capitalisation to GDP
Italy’s stock exchange is
part of the London Stock
Exchange Group.
328 listed companies, 752
listed ETP.
1040 fixed income listed
securities.
N. 1 in Europe both for
turnover velocity and fixed
income trades & turnover.
What makes Italy attractive?
10
30
50
70
90
110
130
150
170
2000 2002 2004 2006 2008 2010 2012
Ind
ice
s 2
00
0=
10
0
Italy France UK
Spain Europe Germany
Source: World Bank
28
FTSE MIB: Corporate Italy SOLID STOCK MARKET
Source: Borsa Italiana
What makes Italy attractive?
Euro bn Capitalization Sector
1 ENI 66.0 Oil & Gas
2 Intesa SanPaolo 40.1 Regional banks
3 Enel 38.6 Electric utilities
4 Unicredit 38.5 Regional banks
5 Generali 25.3 Insurance (life)
6 Luxottica 20.1 Medical equipment and supplies
7 Telecom Italia 15.6 Communication services
8 Atlantia 15.4 Finance
9 Sogefi 14.3 Automotive industry
10 Cobra Automotive Tech. 11.3 Telematics and electronics infrastructure
Top 10 by Capitalization (31-03-2014)
29
Product market reforms by sectors
NUMEROUS REFORMS UNDERTAKEN
What makes Italy attractive?
OECD Product Market Regulation Indicator - Italy
A low number means a
less regulated sector
Expand contributions
from institutional investors to
SMEs, incentives for
credit alternatives
such as mini-bonds
Strengthening and refinancing (Allowance for
Corporate Equity – ACE)
Fund for the concessional tax treatment for Business
Networks
Incentives for investment in
SMEs that have gone public or are about to go
public
Support seed and venture
capital as well as new
innovative firms
PURPOSE
Extend the sources of corporate funding, consolidate corporate financial structure
and reward business networks.
privati
Corporate finance for growth
TIMELINE
September 2014
What makes Italy attractive?
SEVERAL REFORMS IN THE PIPELINE
Re-organisation of regulations
governing local public services and upgrades of municipal
companies and local utilities
Deregulation and implementation of
existing regulations
(Annual Competition Law)
Enhance marketing of
‘Made in Italy’ products
Tax relief and streamlined
procedures for FDI.
Strengthening the Customs
One-Stop Shop for Companies
Overhaul of the rules governing deductible costs
of business transactions with
suppliers in blacklisted countries
PURPOSE
Release market potential. Support internationalisation and exports of Italian companies,
making things easier for companies already operating in foreign markets.
Competition, deregulation and internationalisation of businesses
TIMELINE
September 2014
What makes Italy attractive?
SEVERAL REFORMS IN THE PIPELINE
Boost R&D investment
and tax credits for research
activities and hiring of
researchers
Tax benefits for firms
upgrading their
production sites
Strengthening the Central
Guarantee Fund for lending to
SMEs
Cut energy bills for SMEs by 10%.
Diversification of supplies and completion of
deregulation in the electricity and gas
market
Implementation of ‘Destinazione Italia’ with simplifications
and incentives dedicated to
foreign investors
PURPOSE
Help boost investments focused on innovation and revitalise corporate lending. Cut costs for
SMEs by improving business environment. Promote investment attraction in Italy.
Boost investment and cut energy bills
TIMELINE
September 2014 and December 2014 (for investment attraction)
What makes Italy attractive?
SEVERAL REFORMS IN THE PIPELINE
Established a ‘mission unit’ to
implement measures to
prevent hydrogeological
risk and soil protection
Start clean-up of polluted sites of national interest (SIN). Fund to relocate heavy industrial plants
currently in densely populated areas. Design
regulations on proper waste management
tariffs
Speed up environmental clean-up and rehabilitation
efforts by polluters and promote
industrial redevelopment of formerly polluted
sites
Simplify procedures to access CAP funds.
Establish an Organic Farming Information
System (Sistema Informativo per il Biologico-SIB).
Implement labelling laws to protect Made in
Italy trademark
PURPOSE
Make the most of Italy’s resources, land and environment. Promote competitiveness and
export potential of agricultural sector and the quality of Made in Italy products.
Green growth and efficient use of resources
TIMELINE
November 2014
What makes Italy attractive?
SEVERAL REFORMS IN THE PIPELINE
Adopt the National Strategic
Tourism Plan. Introduce
appropriate financial
instruments to encourage
entrepreneurs and to upgrade
facilities
Incentives to tourist and cultural business networks.
Grant incentives to greenfield and brownfield
tourist development projects that create jobs. Start a
digitisation plan aimed at increasing the online
presence of hotels and accommodation facilities
Develop a single set of nationwide
regulations on hotel
classification, establishing
minimum national
standards of excellence
Encourage investment beyond a minimum threshold,
in particular investment relating to the development of
selected tourist centres, especially in
Southern Italy. Upgrade tourist
education
PURPOSE
Realise full benefits from tourism potential. Affirm the uniqueness of Italy’s values by
protecting and promoting cultural activities and assets.
Tourism and culture as drivers of growth
TIMELINE
October 2014
SEVERAL REFORMS IN THE PIPELINE
What makes Italy attractive?
35
Privatization Plan 2014 - 2015
Postal & financial services,
ICT, logistics
40% of the company
to be sold through IPO
Company Name - Relevant Sectors
4% of the company
to be sold through market
placement
Shipbuilding, cruise liners,
yachts, naval-oil & gas
vessels
40% of the company
to be sold through IPO,
including a capital increase
60% of the company
to be sold through IPO
Export finance,
credit insurance
CDP Reti Gas transportation
(30% stake in Snam)
& power high voltage
(30% stake in Terna)
49% of the company
to be sold through trade sale
Air traffic control 49% of the company
to be sold through IPO
Transaction
description
Oil & Gas
TLC infrastructure
provider for RAI broadcast
Opening to private capital
WIDE RANGE OF OPPORTUNITIES
2014 2015
Company Name - Relevant Sectors
Transaction
description
Railways company Opening up to private
capital, different options
currently under study
Further measures
Municipal
utilities
Companies that provide public
utilities at a local level
(transport, energy, waste
collection and management)
Public real
estate assets
Real estate assets,
State and local authorities
properties
Opening to private capital
and significant aggregations
through mergers
New disposal plan of public
real estate assets
0.7% GDP yearly from 2014 to 2017
Expected income from privatization schemes
and real estate assets disposal plan
What makes Italy attractive?
Italy’s inward FDI stock position: ready for a pick up
36
WIDE RANGE OF OPPORTUNITIES
0 20 40 60 80 100
Chemical products
Food products
Legal, accounting
Monetary intermediation
Other business activities
Trade and repairs
Transports
Fin. holding companies
Other fin. intermediation
Real estate & business
Fin. internediation
Manufacturing
2012 2008
Euro bn Source: OECD dataset
What makes Italy attractive?
Providing certainty to FDI investors
WHAT’S NEXT WHAT HAS ALREADY BEEN DONE
Certainty of Taxation
• Review of tax sanctions and litigation legal framework
• Review of tax havens “black list”
Certainty of Rules
• Review of the abuse of rights
• Consolidate Labour law
Certainty of Procedures
• Reform of “Conferenza dei servizi”, which approves all major authorization procedures for industrial plants
• Facilitate real-estate investment through simplification of procedures
Certainty of Taxation
• Closer collaboration between Italy’s Revenue Agency and investors. Tax agreements and dedicated desk
• Tax credits for research & development expenses
• Extensive cuts to the tax wedge
• Lower taxes on young people salaries
Certainty of Rules
• Creation of specific Business Courts for foreign investors
• Simplification of Court proceedings
Certainty of Procedures
• Simplification of authorization procedures
• Facilitated financing for SMEs including through access to capital markets
• Dedicated visas for investors, researchers and foreign students
37
WIDE RANGE OF OPPORTUNITIES
What makes Italy attractive?
Finance for Growth
April 2014: Launch of Finance for Growth, to promote credit
enhancement and the development of alternative forms of
financing especially for SMEs.
Areas of intervention: Credit guarantees; Credit funds;
Minibond funds; ACE (Aid to economic growth); Crowdfunding;
Venture capital funds; Long term investors; PPPs.
Government’s priority to bring finance for growth high on the
European Agenda, also in the perspective of the Italian
Presidency.
38
WIDE RANGE OF OPPORTUNITIES
What makes Italy attractive?