While some European countries struggle to attract Foreign Direct Investment (FDI), Italy has positioned itself as a top destination. The focus is on manufacturing and innovation.
— By William Bell
Italy is the world's eighth largest economy, but that is not its only business claim to fame. It is also a gateway to the European Singles Market, a major logistics hub, and a leader in research and development (R&D). Italy is often thought of as a tourist destination, so it may be surprising to discover a focus on building a strong manufacturing base over the decades has kept Italy as the second largest manufacturing economy in Europe for 30 years.
The country offers an extensive network of SMEs and industrial suppliers able to support global supply chains. There is an educated workforce, a culture of innovation, and a supportive government that encourages foreign investors through its policies.
Next Generation of Industry
Italy is an economic success, and in a setting of global turmoil it is a country offering economic stability to foreign investors.
In January 2017, the Italian government launched the "Industria 4.0" initiative. The initiative is a national plan for innovation that places focus on taking "full advantage of opportunities related to the fourth industrial revolution, promoting investments in innovation, intangible assets and R&D." The Italian Ministry of Economic Development launched the initiative to bring industrial change by strengthening the manufacturing industry and attracting billions in Foreign Direct Investment (FDI). Core elements of the plan include advancing technologies and innovation and developing a workforce with the right skills.
The Industria 4.0 initiative has been instrumental in Italy's quest to increase FDI flows, reaching more than $1.9 trillion in 2018. The result is the business environment is robust, competitive, and now the 10th most attractive global investment destination in the world.
Even more enticing to global investors is the fact there are opportunities across industries. However, due to the focus on manufacturing innovation, the sector producing high-quality consumer goods is a major economic driver.
Thriving Across Industries
Manufacturing is not the only thriving sector. As would be expected, tourism is a major contributor to the Italian economy in terms of GDP and the number of jobs. This is triggering opportunities to invest in the hospitality sector – hotels/motels and other accommodations plus the ancillary services they require like tours and restaurants.
Other service sectors that are growing include telecommunications and transportation. Italy has a number of high-capacity ports, making it a shipping hub in the Mediterranean. At the June 2019 International Paris Air Show, the Italian Trade Agency showcased its growing aerospace industry, which is loaded with business opportunities that include developing composite materials, remote airplane piloting, microsatellites, intelligent adaptive structures and more.
Italy has duty free access to more than 30 national markets. The strategic location and duty free access have driven Italy to continually improve its ports, highways, high-speed rail and airports. FDIs have grown more than exports and GDP, giving a sense of the real opportunities global businesses are finding in Italy.
The industrial sector, second only to the services sector, employs approximately 30 percent of the workforce. There is what is called the "Industrial Triangle" with points in Milan, Turin and Genoa. Here is found some of the largest industries in aerospace, naval, automotive and machinery. There are numerous small and medium-sized businesses, too, producing many of the high-quality products that Italy is known for, like textiles and leather products.
The fact is the manufacturing sector covers a wide and diverse range of items that include food and beverage, iron and steel, chemicals, and machine tools. Italy also is a major producer of wine, rice, cereal crops, livestock and fish.
The life sciences industry also holds a wealth of investment opportunities. There is a large pharma manufacturing sector. Approximately 60 percent of pharma companies are foreign-owned. Other robust sectors in life sciences include medical devices; advanced therapy medicinal products; biotechnology; and R&D in areas that include vaccines, degenerative diseases, cardiovascular diseases, immunology and others.
Driving Innovation Through Inclusion
Innovation is at the core of the Italian government's drive to expand its economy. Italy has pushed the creation of a National Innovation System in which technology and information are shared among businesses, researchers, government institutions, and educational facilities. Today, the country has a growing R&D network of innovation centres.
The world-renowned CERN lab is the leading particle-physics laboratory where global scientists collaborate to study lofty concepts like the building blocks of matter. Started in 1954, there are now innovation centres located around the country that are exploring, developing, and using state-of-the-art technologies across industries.
The government has promoted the inclusion of global citizens in generating innovation by joining the European Network of Living Labs (ENoLL). The user-centered, open innovation ecosystem offers support to small and medium-sized international companies, citizens, the public sector, and organizations interested in developing innovation in business and industry and the creation of tax revenues and jobs.
Minimizing Investment Risks
In a volatile business environment, many companies choose to minimize risks, making Italy a natural choice for foreign investment. Resources for beginning research for investments include the Italian Trade Agency (ITA) and the Ministry of Economic Development.
The ITA offers 10 reasons to invest in Italy. The first five are: 1) Ranking among the world's top economies and markets; 2) Strategic logistic hub; 3) Key player in manufacturing and international trade; 4) Proven global competitiveness in machinery and ”Made in Italy” sector; and 5) Competitive and skilled workforce. The list of 10 also includes open to foreign investment.
Industrial foreign investors already employ 11 percent of Italy's workforce, produce more than 20 percent of domestic turnover, and export 26 percent of national exported goods, and there is still room to grow. It is proof that Italy is the right place to find low-risk business opportunities.
At the time of this article the Covid-19 virus did not yet reach Italy. We are hoping that after this crisis recedes Italy will once again be a great investment destination.