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Foreign Direct Investment – Italy Not in Top 15

It’s easy to be negative about Italy, and the country is receiving quite a lot of bad press at the moment, what with potentially repressive laws designed to restrict press freedom, and the odd scandal or three.  All the furore leads to this question, possibly: Could Italy’s tarnished image be damaging the countries foreign direct investment prospects?

The answer, according to the UNCTAD – the United Nations Conference on Trade and Development appears to be a big yes.  In fact, in the UNCTAD’s World Investment Prospects Survey for the period 2009 to 2011, Italy does not even figure in the top 15 countries in terms of ‘The 15 most attractive economies for the location of FDI’ – page 65 of the UNCTAD survey, if you are interested (link to the survey below).

The top five countries of the world which are most attractive to foreign direct investment are: China, the USA, India, Brazil and the Asian Federation.  France sits at the bottom of the top 15, incidentally.

What could be putting off foreign direct investment in Italy?


With its spiralling public debt problem, increasing levels of corruption and overly restrictive employment legislation, Italy is not doing itself any favours.  Such a shame, for if Italy played its cards right, it could attract investment to its sluggish research and development sector, which would give intelligent Italians less of an excuse to run away from Italy, and might even, shock horror, promote more meritocracy in this ‘who you know’ Living Museum.

Shuffles Afoot

OK, so there are moves, or better, there are shuffles afoot to make it easier to set up a business in Italy, but that is only part of the story.  Once you have a nice shiny new business in Italy you still have to contend with a tax burden which is the fifth highest in Europe, after such welfare efficient countries as Denmark, Sweden, Belgium and Austria.  Aside from crippling, and complex, taxes, there is the small matter of getting paid, which is not all that easy in Italy.  No talk of reforms in this area though. No, that would be far too practical.


Italy’s Economy and Finance Minister, lawyer, Guilio Tremonti, is pushing for huge cuts in public spending, but is not, it seems, exploring alternative ways of boosting Italy’s income – such as making Italy more attractive for foreign investors.   Italy’s already shaky welfare system and wobbly public services are likely to take a big hit if these cuts actually happen, and this is unlikely to do much good for the smooth running of Italy’s already rocky economy, alas.  While I write this, Italy’s regions are slamming Italy’s central government over the proposed cuts, and have even threatened to devolve back, if one can do such a thing, powers which were devolved to them in a former government reform designed to de-centralise certain government functions.  In the face of pressure from Italy’s irate regions, Berlusconi is making noises to the effect that he is prepared to talk about the cuts.

Cuts to be Cut?

A potential result of the discussions on the cuts, is that the cuts may be cut, if you follow me.  This, of course, will leave Italy with the same problems as the government is trying to resolve.  With a little constructive thought though, Italy’s well-paid masters could introduce some real reforms which would encourage foreign investment and thus bring growth to Italy’s all but stagnant economy.  Italy, by the way is one of Europe’s PIIGS – BBC The Case Against the Euro.

Feeling Lucky, Foreign Investor?

Then again, you’d have to be a pretty brave foreign investor to pour money into a country in which one of its senior political leaders is threatening violent revolution if he does not get his way.  If you had not guessed, that political leader is Northern League chief, Umberto Bossi, Italy’s Second Most Important Politician.  Moreover, kicking off a business in Italy’s eternally depressed south is not too attractive either, unless investors budget for mafia handouts, that is.

Alternative Foreign Investment in Italy

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Funny the subject of mafia should come up, as yesterday in Florence, an investigation culminated in the seizure of 73 companies which were involved in money laundering for the Chinese mafia.  Sums of three billion Euros are being bandied around by Italy’s press, and it was not just sunny Tuscany which has attracted this form of alternative foreign investment, but also another seven other Italian regions, including, surprise, surprise, Sicily.

In Summary – FDI Prospects for Italy

The north of Italy- threats of violent revolution.

The central midriff of Italy – Chinese mafia got there first.

The South of Italy – the mafia has been there for years.

Grim, isn’t it?

World Bank FDI Figures

Now take a look at this World Bank Chart which shows Foreign Direct Investment net in-flows up to 2008 into Italy, China, France, USA, UK and Spain.  Notice, first, the exceedingly low level of FDI in Italy when compared to Spain and France, and note the dip from 2007 to 2008. Hover your mouse over the lines on the chart to see the total levels of FDI for the years shown:

From: Foreign direct investment, net inflows Italy, China, France, USA, UK and Spain – World Bank

Italy does not look too attractive, now does it?

I wonder if UNCTAD also carries out a survey into the countries of the world which are most attractive to organised criminal foreign investment?  I doubt it, but if it did, Italy, one suspects, would make it into the Top 15.  Very sad.

UNCTAD’s World Investment Prospects Survey for the period 2009 to 2011 – .pdf file

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