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Foreign investments as a driver of growth in Italy

Milan, 18/11/2019, National Roundtable

Italy has great potential to attract investments but many factors still hinder the influx of foreign capital. Data on the presence of multinationals offer a mottled picture. As regards the manufacturing sector, the more important of the second ranked European industrial power, nearly 20% of employees answer to foreign multinationals, a percentage that rises to 25% in the field of mechanical engineering, the pride of the “made in Italy” brand. These firms have a more positive performance (racking up one percentage point more in turnover as compared with Italian firms in 2015-2017) and create more jobs, generally making an economic contribution to the national economy equal to that of the entire automotive sector.

Nevertheless, acquisitions prevail in investment operations (70%) while Greenfield investments account for less than one-third of the total – a significant indication of the difficulty that international investors and firms experience when doing business in Italy. The first step the country should take within the framework of a long-term industrial policy, is to establish which foreign investments to attract and where to find them.

Northern Italy (Lombardy at first place) is currently monopolizing foreign investments. And yet, as the recent events in Taranto have shown, a stronger Southern Italy is in greater need of funds and energies. Investment planning left entirely to the whims of international actors fails to consider the growing competition between countries attempting to attract foreign capital or the measures enacted by Italy’s competitors.

If it remains crucial to ensure greater legislative and political stability, which are factors that have a considerable influence on investment flows, a change in mentality is also undeniably necessary. The all too widespread notion that foreign investments are a threat to the national economy, fuelled by a certain public sector diffidence toward private foreign actors, puts a further strain on investments.

It should not be forgotten that the presence of multinationals and foreign investors is an element capable of increasing the competitiveness of the Italian system. The data show that foreign multinationals lead to greater innovation, in addition to offering a management laboratory that generates and circulates skills. Moreover, the presence of major international industrial groups increases the possibility for internationalizing ancillary activities, resulting in important advantages for the national network of small and medium-sized enterprises.