Identifier
Created
Classification
Origin
07ROME149
2007-01-23 16:36:00
UNCLASSIFIED
Embassy Rome
Cable title:
INVESTMENT CLIMATE STATEMENT 2007 - ITALY, PART II
how-toVZCZCXRO5893 OO RUEHFL RUEHNP DE RUEHRO #0149/01 0231636 ZNR UUUUU ZZH O 231636Z JAN 07 FM AMEMBASSY ROME TO RUEHC/SECSTATE WASHDC IMMEDIATE 6994 RUCPDOC/USDOC WASHDC IMMEDIATE RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE RUCPCIM/CIMS NTDB WASHDC IMMEDIATE INFO RUEHMIL/AMCONSUL MILAN PRIORITY 8241 RUEHNP/AMCONSUL NAPLES PRIORITY 2215 RUEHFL/AMCONSUL FLORENCE PRIORITY 2081
UNCLAS SECTION 01 OF 08 ROME 000149
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SUBJECT: INVESTMENT CLIMATE STATEMENT 2007 - ITALY, PART II
REF: ROME 147
06 STATE 178303
UNCLAS SECTION 01 OF 08 ROME 000149
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SUBJECT: INVESTMENT CLIMATE STATEMENT 2007 - ITALY, PART II
REF: ROME 147
06 STATE 178303
1. This is part two of a two-part cable on Italy's investment
climate. (See ref A for part one.)
BILATERAL INVESTMENT AGREEMENTS
--------------
2. As of December 2006, Italy has bilateral investment agreements
with the following countries:
Albania
Algeria
Angola (signed, not enforced)
Argentina
Armenia
Azerbaijan
Bangladesh
Barbados
Belarus
Belize (signed, not enforced)
Bolivia
Bosnia and Herzegovina
Brazil (signed, not enforced)
Bulgaria
Cape Verde (signed, not enforced)
Chad
Chile
China
Colombia (signed, not enforced)
Congo
Cote d'Ivoire (signed, not enforced)
Croatia
Cuba
Czech Republic
Democratic Republic of Congo (signed, not enforced)
Dominican Republic (signed, not enforced)
Ecuador (signed, not enforced)
Egypt
Eritrea
Estonia
Ethiopia
Gabon
Georgia
Ghana (signed, not enforced)
Guatemala (signed, not enforced)
Guinea
Hong Kong, China
Hungary
India
Indonesia
Iran, Islamic Republic of
Jamaica
Jordan
Kazakhstan
Kenya
Korea, DPR of (signed, not enforced)
Korea, Republic of
Kuwait
Latvia
Lebanon
Libya
Lithuania
Macedonia, Republic of
Malawi (signed, not enforced)
Malaysia
Malta
Mauritania (signed, not enforced)
Mexico
Moldova, Republic of
Mongolia
Morocco
Mozambique
Nicaragua
Nigeria
Oman
Pakistan
Paraguay (signed, not enforced)
Peru
Philippines
Poland
Qatar
ROME 00000149 002 OF 008
Romania
Russian Federation
Saudi Arabia
Slovakia
Slovenia
South Africa
Sri Lanka
Sudan (signed, not enforced)
Syrian Arab Republic
Tunisia
Turkey
Uganda
Ukraine
United Arab Emirates
Tanzania, United Republic of
Uruguay
Uzbekistan
Venezuela
Vietnam
Yemen (signed, not enforced)
Zambia (signed, not enforced)
Zimbabwe (signed, not enforced)
OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS
--------------
3. The U.S. Overseas Private Investment Corporation (OPIC) does not
operate in Italy. However, in March 2003, OPIC signed a Memorandum
of Understanding with SIMEST (Societa Italiana per le Imprese
all'Estero),its Italian counterpart, to expand cooperation,
particularly on projects in third countries. Italy, through its
Export Credit Agency, SACE, has signed a memorandum of understanding
with the World Bank's Multilateral Investment Guarantee Agency
(MIGA).
LABOR
--------------
4. Unemployment in Italy is moderate at 6.1 percent (third quarter
2006),and below the average of 7.7 percent among euro zone
countries (November 2006). Italy's unemployment rate is currently
at the lowest level since 1992. Traditional regional disparities
remain unchanged, with the southern third of the country posting a
10.7 percent unemployment rate -- compared to 3.6 percent in
northern and 5.5 percent in central Italy. Despite these
differences, internal migration within Italy remains modest. Labor
shortages in the North are often filled by unskilled and
semi-skilled immigrants.
5. Italy's labor force is fairly well-educated. According to a
2001 national survey, 7.9 percent of adults hold university degrees.
According to the OECD 2005 Economic Review of Italy, the private
internal rate of return -- which measures incentives to invest in
human capital -- is much lower for higher education than the OECD
average, indicating there may be limited incentive for Italians to
pursue higher education. This is due to the fact that persons with
higher educations do not earn substantially more than persons with
upper secondary educations, and because the unemployment risk is
comparable for people at both levels of education. Therefore, firms
interested in investing in Italy may have difficulties finding
highly specialized Italian employees.
6. As in many Western EU member states, there are legal obstacles
to hiring and firing workers. Companies may bring in a non-EU
employee only after the government-run employment office has
certified that no qualified, unemployed Italian is available to fill
the position. Work visas are subject to annual quotas, although
intra-company transfers are exempt from quota limitations.
7. In recent years, the Italian labor market has become somewhat
more flexible. A series of legal reforms has encouraged the hiring
of part-time employees by reducing employer social security
contributions for these workers. New laws have also created
opportunities for outsourcing, job-sharing, and use of private
employment services. New types of contracts now exist that allow
for reduced labor costs. However, high costs and legal obstacles
associated with laying off workers still remain a disincentive for
adding employees.
8. Italy is an International Labor Organization member country.
Terms and conditions of employment are also periodically fixed by
collective labor agreements in different professions. Most Italian
ROME 00000149 003 OF 008
unions are grouped into four major national confederations: the
General Italian Confederation of Labor (CGIL),the Italian
Confederation of Workers' Unions (CISL),the Italian Union of Labor
(UIL),and the General Union of Labor (UGL). The first three
organizations are affiliated with the International Confederation of
Free Trade Unions (ICFTU),while the UGL has been associated with
the World Confederation of Labor (WCL). The confederations
negotiate national level collective bargaining agreements with
employer associations, which are binding on all employers in a
sector or industry.
FOREIGN TRADE ZONES/FREE PORTS
--------------
9. There are two free trade zones in Italy, located in Trieste and
Venice, both in the northeast. Goods of foreign origin may be
brought in without payment of taxes or duties, as long as the
material is to be used in the production or assembly of a product
that will be exported. The free-trade zone law also allows a
company of any nationality to employ workers of the same nationality
under that country's labor laws and social security systems.
Benefits of the free-trade zones include:
-- Customs duties deferred for 180 days from the time that the goods
leave the free trade zone to enter another EU country.
-- The goods may undergo transformation free of any customs
restraints.
-- Absolute exemption from any duties on products coming from a
third country.
U.S. Companies in Italy
--------------
10. The largest U.S. companies in Italy, based on number of
employees, are: IBM, General Electric, Pfizer, Whirlpool,
Electronic Data Systems (EDS),Accenture, Lear, and United
Technologies.
FOREIGN DIRECT INVESTMENT STATISTICS
--------------
11. While Italy provides a reasonably attractive environment for
investment, it lags behind many of its fellow EU member states in
attracting and maintaining foreign investment. According to Bank of
Italy figures, net foreign investment into Italy in 2005 totaled USD
18.7 billion (equal to 1.1 percent of GDP) -- well below that of
Luxembourg (USD 87.6 billion) France (USD 47 billion),Belgium (USD
29.5 billion),Spain (USD 25.6 billion),Ireland (USD 25.5 billion);
but slightly above that of Germany (USD 12.9 billion).
Table 1: Italian Foreign Direct Investment Inflows by Economic
Sector (Net) 2002-2005 (USD Millions) (1) (*)
2002 2003 2004 2005
Agriculture -95.6 108.5 234.8 511.8
Energy 435.2 1993.8 4463.3 10057.1
Industry 4942.9 5933.1 2016.2 6996.3
of which:
Machine 1942.1 2023.9 3690.7 1314.3
Chemical 623.4 1066.8 -3535.4 441.0
Food 504.2 2483.5 362.7 2388.8
Textiles 394.5 353.4 513.0 544.1
Mineral/Metal 311.2 468.5 687.0 1315.5
Other 1167.5 -463.0 298.2 992.6
Building and
Public Works 168.4 363.0 125.7 205.0
Services 8812.9 6634.2 9576.4 925.5
of which:
Banking/
Insurance 4011.0 2972.2 5749.1 1207.5
Trade 525.0 410.4 36.0 653.4
Transportation/
Communication 544.0 -412.6 516.8 -11468.3
ROME 00000149 004 OF 008
Other Services
(Not For Sale) 4459.3 3732.9 3664.2 3274.5
T O T A L 14263.8 15031.9 16416.2 18695.7
Table 2: Italian Direct Investment Outflows by Economic Sector (Net)
2002-2005 (USD Millions) (1) (*)
2002 2003 2004 2005
Agriculture 8.5 38.0 21.1 70.8
Energy 2376.4 3450.7 5336.7 2675.8
Industry 3321.4 1332.9 7573.9 7629.8
of which:
Machine 1428.5 -1393.3 4234.8 3684.5
Chemical 321.6 721.2 1730.4 1730.4
Food 99.3 295.2 151.6 206.2
Textiles 469.2 336.6 287.0 411.2
Mineral/Metal 158.0 274.0 246.0 600.0
Other 844.8 1099.2 924.1 997.5
Building And
Public Works -35.0 223.6 85.7 159.0
Services 9848.8 1935.7 5037.3 7444.7
of which:
Banking/
Insurance 4140.6 5492.6 2636.0 5164.6
Trade 852.3 485.3 1060.9 923.0
Transportation/
Communication 338.7 -8217.6 -923.0 110.6
Other Services
(Not For Sale) 4517.2 4175.4 2263.4 1264.6
T O T A L 15520.1 6980.9 18054.7 17980.1
Table 3a: Stock of Foreign Direct Investment in Italy by Major
Investors; Year End 2003-2005 (USD Millions) (1)
2002 2003 2004 2005
United States 15373.7 19458.1 22448.3 21451.0
EU (3) 80358.0 114010.0 140651.5 145179.5
of which:
France 17071.0 21294.1 24608.6 25637.5
Netherlands 17444.7 26882.4 39009.4 40079.1
United Kingdom 14692.1 22266.6 26613.9 25434.5
Germany 9959.3 13797.2 14312.3 15309.3
Luxembourg 13171.2 18354.2 22336.5 24042.5
Sweden 2431.2 2967.5 3341.8 3034.2
Belgium 2307.9 2963.7 3335.1 1982.3
Spain 936.3 1279.1 1941.0 4820.5
Other EU (4) 2344.3 4205.3 5286.9 4839.4
Switzerland 15375.8 18481.9 21872.7 20115.7
Liechtenstein 1438.4 1824.8 2105.9 1975.2
Japan 2315.2 2991.2 3595.2 3419.1
Argentina 129.4 165.2 257.4 246.8
Brazil 58.5 78.8 128.7 184.2
Other 6182.7 7806.0 9328.5 8747.3
T O T A L 121,231.7 164,816.0 200,379.4 201,318.8
Table 3b: Stock Of Foreign Direct Investment In Italy by Major
Investors; Year End 2002-2005 (Percentage of Total)
2002 2003 2004 2005
United States 12.7 11.8 11.2 10.7
EU (3) 66.3 69.2 70.2 72.1
France 14.1 12.9 12.3 12.7
Netherlands 14.4 16.3 19.5 19.9
United Kingdom 12.1 13.5 13.3 12.6
Germany 8.2 8.4 7.1 7.6
Luxembourg 10.9 11.1 11.1 11.9
Sweden 2.0 1.8 1.7 1.5
Belgium 1.9 1.8 1.7 1.0
ROME 00000149 005 OF 008
Spain 0.8 0.8 1.0 2.4
Other EU (4) 1.9 2.6 2.6 2.4
Switzerland 12.7 11.2 10.9 10.0
Liechtenstein 1.2 1.1 1.1 1.0
Japan 1.9 1.8 1.8 1.7
Argentina 0.1 0.1 0.1 0.1
Brazil 0.1 0.0 0.1 0.1
Other 5.0 4.8 4.6 4.3
T O T A L 100.0 100.0 100.0 100.0
Table 4a: Stock Of Italian Direct Investment Abroad by Major
Recipient; Year End 2002-2005 (USD Millions) (2)
2002 2003 2004 2005
United States 17390.4 18420.5 18851.2 19617.5
EU (3) 118190.0 150010.0 182521.4 178145.2
Netherlands 32087.7 48455.6 63268.1 65081.5
Luxembourg 24228.6 21755.9 26363.3 25154.7
France 16131.5 20921.2 24344.5 23866.6
United Kingdom 18715.0 20270.3 24158.2 22617.5
Germany 9272.4 13065.1 15758.7 15004.7
Spain 7125.3 9871.1 10882.0 9866.6
Belgium 3369.5 4569.5 5308.3 4944.5
Sweden 600.2 748.4 866.3 892.6
Other EU (4) 6659.7 10352.9 11572.4 10716.6
Switzerland 9321.5 10954.9 10559.0 10007.1
Brazil 2486.4 3473.1 3954.4 4935.1
Argentina 1633.6 2127.7 2178.3 2211.3
Japan 954.1 1137.7 1249.9 1164.1
Liechtenstein 144.1 169.0 194.4 175.9
Other 19552.1 22342.9 24901.6 26460.5
T O T A L 169672.0 208635.8 244410.2 243982.3
Table 4b: Stock of Italian Direct Investment Abroad by Major
Recipient; Year End 2002-2005 (Percentage of Total)
2002 2003 2004 2005
United States 10.2 8.8 7.7 8.0
EU 69.7 71.9 74.7 73.0
of which:
Luxembourg 14.3 10.4 10.8 10.3
Netherlands 18.9 23.2 25.9 26.7
France 9.5 10.0 10.0 9.8
Germany 5.5 6.3 6.4 6.1
United Kingdom 11.0 9.7 9.9 9.3
Spain 4.2 4.7 4.5 4.0
Belgium 2.0 2.2 2.2 2.0
Sweden 0.4 0.4 0.4 0.4
Other EU (3) 3.9 5.0 4.7 4.4
Switzerland 5.5 5.4 4.3 4.1
Brazil 1.5 1.7 1.6 2.0
Argentina 1.0 1.0 0.9 0.9
Japan 0.6 0.5 0.5 0.5
Liechtenstein 0.1 0.1 0.1 0.1
Other 11.4 10.6 10.2 11.4
T O T A L 100.0 100.0 100.0 100.0
Table 5a: U.S. Investment in Italy by Economic Sector End-Year
2002-2005 (USD Millions) (2)
2002 2003 2004 2005
Agriculture 29.2 36.3 40.2 41.3
Energy 434.2 545.7 627.6 576.2
Industry 9236.0 11812.3 13607.1 12958.7
of which:
Machine 2098.1 2635.8 2979.7 2792.2
Transportation
ROME 00000149 006 OF 008
Equipment 621.1 782.2 902.5 830.0
Chemical 2487.5 3162.7 3689.1 3447.5
Food 1306.9 1667.1 1920.3 2003.5
Textiles 179.5 230.3 273.6 260.9
Minerals/Metals 272.4 395.5 451.9 433.3
Other 2297.5 2938.7 3390.0 3191.3
Services 5647.2 7063.8 8173.4 7874.8
of which:
Trade 690.0 853.6 987.0 933.9
Banking/
Insurance 2910.2 3505.6 4008.2 3771.0
Transportation/
Communication 456.2 582.0 666.5 636.4
Other Services 1590.8 2122.7 2511.7 2533.5
T O T A L 15373.7 19458.1 22448.3 21451.0
Table 5b: U.S. Investment in Italy by Economic Sector End-Year
2002-2005 (Percentage of Total)
2002 2003 2004 2005
Agriculture 0.2 0.2 0.2 0.2
Energy 2.8 2.8 2.8 2.7
Industry 60.3 60.7 60.6 60.4
of which:
Machine 13.7 13.6 13.3 13.0
Transportation
Equipment 4.0 4.0 4.0 3.9
Chemical 16.2 16.3 16.4 16.1
Food 8.5 8.6 8.6 9.3
Textiles 1.2 1.2 1.2 1.2
Minerals/
Metals 1.8 2.0 2.0 2.0
Other 14.9 15.0 15.1 14.9
Services 36.7 36.3 36.4 36.7
of which:
Trade 4.5 4.4 4.4 4.3
Banking/
Insurance 18.9 18.0 17.9 17.6
Transportation/
Communication 3.0 3.0 3.0 3.0
Other Services 10.3 10.9 11.1 11.8
T O T A L 100.0 100.0 100.0 100.0
Table 6a: Italian Investment in the U.S. by Economic Sector --
End-Year 2002-2005 (USD Millions) (2)
2002 2003 2004 2005
Agriculture 48.0 51.3 52.3 62.6
Energy 1727.6 1816.0 1831.8 1877.2
Industry 6749.5 7061.3 7254.8 7589.1
of which:
Machine 2484.3 2732.2 2777.2 2850.1
Transportation
Equipment 775.6 863.6 950.8 966.9
Chemical 494.8 261.6 205.2 212.5
Food 249.5 264.1 273.6 289.3
Textiles 670.1 724.7 741.6 813.5
Minerals/
Metals 1440.5 1541.9 1589.1 1637.5
Other 634.7 673.3 717.3 819.4
Services 8865.3 9491.9 9719.6 10088.5
of which:
Trade 690.0 1142.7 1177.4 1201.9
Banking/
Insurance 4179.5 4434.3 4615.7 4796.9
Transportation/
Communication 456.2 274.1 232.0 242.0
Other 3539.7 3640.8 3694.5 3847.7
T O T A L 17390.4 18420.5 18858.5 19617.5
ROME 00000149 007 OF 008
Table 6b: Italian Investment in the U.S. by Economic Sector --
End-Year 2002-2005 (Percentage of Total)
2002 2003 2004 2005
Agriculture 0.3 0.3 0.3 0.3
Energy 10.5 9.9 9.9 9.6
Industry 39.1 38.8 38.3 38.7
of which:
Machine 14.7 14.3 14.8 14.5
Transportation
Equipment 4.5 4.5 4.7 4.9
Chemical 2.7 2.9 1.4 1.1
Food 1.4 1.4 1.4 1.5
Textiles 3.9 3.8 3.9 4.2
Minerals/
Metals 8.2 8.3 8.4 8.3
Other 3.7 3.6 3.7 4.2
Services 50.1 51.0 51.5 51.4
of which:
Trade 6.3 4.0 6.2 6.1
Banking/
Insurance 23.6 24.0 24.1 24.5
Transportation/
Communication 1.5 2.6 1.5 1.2
Other 18.7 20.4 19.7 19.6
T O T A L 100.0 100.0 100.0 100.0
Table 7: Direct Investment by Origin and Destination End-Year 2005
(USD Millions)
Foreign Italian Net
Investment Investment Italian
in Italy Abroad Position
EU 145179.5 178145.3 32965.8
of which:
United Kingdom 25434.5 22617.5 -2817.0
Netherlands 40079.1 65081.5 25002.4
Germany 15309.3 15004.7 -304.6
France 25637.6 23866.6 -1771.0
Spain 4820.5 9866.6 5046.1
Luxembourg 24042.5 25154.7 1112.2
Belgium 1982.3 4944.5 2962.2
Sweden 3034.2 892.6 -2141.6
Other (4) 4839.5 10716.6 5877.1
Non-EU 56139.3 65837.1 9697.8
of which:
USA 21451.0 19617.5 -1833.5
Switzerland 20115.7 10007.1 -10108.6
Liechtenstein 1975.2 175.9 -1799.3
Japan 3419.1 1164.1 -2255.0
Canada 815.8 1265.6 449.8
Argentina 246.8 2211.3 1964.5
Brazil 184.2 4935.1 4750.9
Other 7931.5 29460.6 18528.9
T O T A L 201318.8 243982.3 42663.5
(1) Annual net investment flow data compiled by Embassy Economic
Section, based on Bank of Italy data and converted at the following
end-year exchange rates:
2002 2003 2004 2005
Euro/Dollar 1.057 0.894 0.805 0.805
Net = New Investment Less Disinvestment. The volatility and huge
changes from year to year in some sections can be explained in part
by the fact that listed data are "Net": New Investment Minus
Disinvestment.
(2) Compiled by the Economic Section of the Embassy based on Bank of
Italy data and converted at the following end year exchange rates:
2002 2003 2004 2005
ROME 00000149 008 OF 008
Euro/Dollar 0.958 0.799 0.746 0.847
(3) EU 15 data for 2002, EU 25 data for 2003-2005.
(4) Austria, Denmark, Finland, Portugal, Greece, Ireland (other EU
25 countries),plus Cyprus, Czech Republic, Estonia, Hungary,
Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia.
(5) Original data in euro and converted at the end-2005 exchange
rate of one dollar = 0.847 euro.
Sources: Italian Exchange Office And Bank Of Italy Annual Report
2005.
12. END PART TWO OF CABLE.
SPOGLI
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SUBJECT: INVESTMENT CLIMATE STATEMENT 2007 - ITALY, PART II
REF: ROME 147
06 STATE 178303
1. This is part two of a two-part cable on Italy's investment
climate. (See ref A for part one.)
BILATERAL INVESTMENT AGREEMENTS
--------------
2. As of December 2006, Italy has bilateral investment agreements
with the following countries:
Albania
Algeria
Angola (signed, not enforced)
Argentina
Armenia
Azerbaijan
Bangladesh
Barbados
Belarus
Belize (signed, not enforced)
Bolivia
Bosnia and Herzegovina
Brazil (signed, not enforced)
Bulgaria
Cape Verde (signed, not enforced)
Chad
Chile
China
Colombia (signed, not enforced)
Congo
Cote d'Ivoire (signed, not enforced)
Croatia
Cuba
Czech Republic
Democratic Republic of Congo (signed, not enforced)
Dominican Republic (signed, not enforced)
Ecuador (signed, not enforced)
Egypt
Eritrea
Estonia
Ethiopia
Gabon
Georgia
Ghana (signed, not enforced)
Guatemala (signed, not enforced)
Guinea
Hong Kong, China
Hungary
India
Indonesia
Iran, Islamic Republic of
Jamaica
Jordan
Kazakhstan
Kenya
Korea, DPR of (signed, not enforced)
Korea, Republic of
Kuwait
Latvia
Lebanon
Libya
Lithuania
Macedonia, Republic of
Malawi (signed, not enforced)
Malaysia
Malta
Mauritania (signed, not enforced)
Mexico
Moldova, Republic of
Mongolia
Morocco
Mozambique
Nicaragua
Nigeria
Oman
Pakistan
Paraguay (signed, not enforced)
Peru
Philippines
Poland
Qatar
ROME 00000149 002 OF 008
Romania
Russian Federation
Saudi Arabia
Slovakia
Slovenia
South Africa
Sri Lanka
Sudan (signed, not enforced)
Syrian Arab Republic
Tunisia
Turkey
Uganda
Ukraine
United Arab Emirates
Tanzania, United Republic of
Uruguay
Uzbekistan
Venezuela
Vietnam
Yemen (signed, not enforced)
Zambia (signed, not enforced)
Zimbabwe (signed, not enforced)
OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS
--------------
3. The U.S. Overseas Private Investment Corporation (OPIC) does not
operate in Italy. However, in March 2003, OPIC signed a Memorandum
of Understanding with SIMEST (Societa Italiana per le Imprese
all'Estero),its Italian counterpart, to expand cooperation,
particularly on projects in third countries. Italy, through its
Export Credit Agency, SACE, has signed a memorandum of understanding
with the World Bank's Multilateral Investment Guarantee Agency
(MIGA).
LABOR
--------------
4. Unemployment in Italy is moderate at 6.1 percent (third quarter
2006),and below the average of 7.7 percent among euro zone
countries (November 2006). Italy's unemployment rate is currently
at the lowest level since 1992. Traditional regional disparities
remain unchanged, with the southern third of the country posting a
10.7 percent unemployment rate -- compared to 3.6 percent in
northern and 5.5 percent in central Italy. Despite these
differences, internal migration within Italy remains modest. Labor
shortages in the North are often filled by unskilled and
semi-skilled immigrants.
5. Italy's labor force is fairly well-educated. According to a
2001 national survey, 7.9 percent of adults hold university degrees.
According to the OECD 2005 Economic Review of Italy, the private
internal rate of return -- which measures incentives to invest in
human capital -- is much lower for higher education than the OECD
average, indicating there may be limited incentive for Italians to
pursue higher education. This is due to the fact that persons with
higher educations do not earn substantially more than persons with
upper secondary educations, and because the unemployment risk is
comparable for people at both levels of education. Therefore, firms
interested in investing in Italy may have difficulties finding
highly specialized Italian employees.
6. As in many Western EU member states, there are legal obstacles
to hiring and firing workers. Companies may bring in a non-EU
employee only after the government-run employment office has
certified that no qualified, unemployed Italian is available to fill
the position. Work visas are subject to annual quotas, although
intra-company transfers are exempt from quota limitations.
7. In recent years, the Italian labor market has become somewhat
more flexible. A series of legal reforms has encouraged the hiring
of part-time employees by reducing employer social security
contributions for these workers. New laws have also created
opportunities for outsourcing, job-sharing, and use of private
employment services. New types of contracts now exist that allow
for reduced labor costs. However, high costs and legal obstacles
associated with laying off workers still remain a disincentive for
adding employees.
8. Italy is an International Labor Organization member country.
Terms and conditions of employment are also periodically fixed by
collective labor agreements in different professions. Most Italian
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unions are grouped into four major national confederations: the
General Italian Confederation of Labor (CGIL),the Italian
Confederation of Workers' Unions (CISL),the Italian Union of Labor
(UIL),and the General Union of Labor (UGL). The first three
organizations are affiliated with the International Confederation of
Free Trade Unions (ICFTU),while the UGL has been associated with
the World Confederation of Labor (WCL). The confederations
negotiate national level collective bargaining agreements with
employer associations, which are binding on all employers in a
sector or industry.
FOREIGN TRADE ZONES/FREE PORTS
--------------
9. There are two free trade zones in Italy, located in Trieste and
Venice, both in the northeast. Goods of foreign origin may be
brought in without payment of taxes or duties, as long as the
material is to be used in the production or assembly of a product
that will be exported. The free-trade zone law also allows a
company of any nationality to employ workers of the same nationality
under that country's labor laws and social security systems.
Benefits of the free-trade zones include:
-- Customs duties deferred for 180 days from the time that the goods
leave the free trade zone to enter another EU country.
-- The goods may undergo transformation free of any customs
restraints.
-- Absolute exemption from any duties on products coming from a
third country.
U.S. Companies in Italy
--------------
10. The largest U.S. companies in Italy, based on number of
employees, are: IBM, General Electric, Pfizer, Whirlpool,
Electronic Data Systems (EDS),Accenture, Lear, and United
Technologies.
FOREIGN DIRECT INVESTMENT STATISTICS
--------------
11. While Italy provides a reasonably attractive environment for
investment, it lags behind many of its fellow EU member states in
attracting and maintaining foreign investment. According to Bank of
Italy figures, net foreign investment into Italy in 2005 totaled USD
18.7 billion (equal to 1.1 percent of GDP) -- well below that of
Luxembourg (USD 87.6 billion) France (USD 47 billion),Belgium (USD
29.5 billion),Spain (USD 25.6 billion),Ireland (USD 25.5 billion);
but slightly above that of Germany (USD 12.9 billion).
Table 1: Italian Foreign Direct Investment Inflows by Economic
Sector (Net) 2002-2005 (USD Millions) (1) (*)
2002 2003 2004 2005
Agriculture -95.6 108.5 234.8 511.8
Energy 435.2 1993.8 4463.3 10057.1
Industry 4942.9 5933.1 2016.2 6996.3
of which:
Machine 1942.1 2023.9 3690.7 1314.3
Chemical 623.4 1066.8 -3535.4 441.0
Food 504.2 2483.5 362.7 2388.8
Textiles 394.5 353.4 513.0 544.1
Mineral/Metal 311.2 468.5 687.0 1315.5
Other 1167.5 -463.0 298.2 992.6
Building and
Public Works 168.4 363.0 125.7 205.0
Services 8812.9 6634.2 9576.4 925.5
of which:
Banking/
Insurance 4011.0 2972.2 5749.1 1207.5
Trade 525.0 410.4 36.0 653.4
Transportation/
Communication 544.0 -412.6 516.8 -11468.3
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Other Services
(Not For Sale) 4459.3 3732.9 3664.2 3274.5
T O T A L 14263.8 15031.9 16416.2 18695.7
Table 2: Italian Direct Investment Outflows by Economic Sector (Net)
2002-2005 (USD Millions) (1) (*)
2002 2003 2004 2005
Agriculture 8.5 38.0 21.1 70.8
Energy 2376.4 3450.7 5336.7 2675.8
Industry 3321.4 1332.9 7573.9 7629.8
of which:
Machine 1428.5 -1393.3 4234.8 3684.5
Chemical 321.6 721.2 1730.4 1730.4
Food 99.3 295.2 151.6 206.2
Textiles 469.2 336.6 287.0 411.2
Mineral/Metal 158.0 274.0 246.0 600.0
Other 844.8 1099.2 924.1 997.5
Building And
Public Works -35.0 223.6 85.7 159.0
Services 9848.8 1935.7 5037.3 7444.7
of which:
Banking/
Insurance 4140.6 5492.6 2636.0 5164.6
Trade 852.3 485.3 1060.9 923.0
Transportation/
Communication 338.7 -8217.6 -923.0 110.6
Other Services
(Not For Sale) 4517.2 4175.4 2263.4 1264.6
T O T A L 15520.1 6980.9 18054.7 17980.1
Table 3a: Stock of Foreign Direct Investment in Italy by Major
Investors; Year End 2003-2005 (USD Millions) (1)
2002 2003 2004 2005
United States 15373.7 19458.1 22448.3 21451.0
EU (3) 80358.0 114010.0 140651.5 145179.5
of which:
France 17071.0 21294.1 24608.6 25637.5
Netherlands 17444.7 26882.4 39009.4 40079.1
United Kingdom 14692.1 22266.6 26613.9 25434.5
Germany 9959.3 13797.2 14312.3 15309.3
Luxembourg 13171.2 18354.2 22336.5 24042.5
Sweden 2431.2 2967.5 3341.8 3034.2
Belgium 2307.9 2963.7 3335.1 1982.3
Spain 936.3 1279.1 1941.0 4820.5
Other EU (4) 2344.3 4205.3 5286.9 4839.4
Switzerland 15375.8 18481.9 21872.7 20115.7
Liechtenstein 1438.4 1824.8 2105.9 1975.2
Japan 2315.2 2991.2 3595.2 3419.1
Argentina 129.4 165.2 257.4 246.8
Brazil 58.5 78.8 128.7 184.2
Other 6182.7 7806.0 9328.5 8747.3
T O T A L 121,231.7 164,816.0 200,379.4 201,318.8
Table 3b: Stock Of Foreign Direct Investment In Italy by Major
Investors; Year End 2002-2005 (Percentage of Total)
2002 2003 2004 2005
United States 12.7 11.8 11.2 10.7
EU (3) 66.3 69.2 70.2 72.1
France 14.1 12.9 12.3 12.7
Netherlands 14.4 16.3 19.5 19.9
United Kingdom 12.1 13.5 13.3 12.6
Germany 8.2 8.4 7.1 7.6
Luxembourg 10.9 11.1 11.1 11.9
Sweden 2.0 1.8 1.7 1.5
Belgium 1.9 1.8 1.7 1.0
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Spain 0.8 0.8 1.0 2.4
Other EU (4) 1.9 2.6 2.6 2.4
Switzerland 12.7 11.2 10.9 10.0
Liechtenstein 1.2 1.1 1.1 1.0
Japan 1.9 1.8 1.8 1.7
Argentina 0.1 0.1 0.1 0.1
Brazil 0.1 0.0 0.1 0.1
Other 5.0 4.8 4.6 4.3
T O T A L 100.0 100.0 100.0 100.0
Table 4a: Stock Of Italian Direct Investment Abroad by Major
Recipient; Year End 2002-2005 (USD Millions) (2)
2002 2003 2004 2005
United States 17390.4 18420.5 18851.2 19617.5
EU (3) 118190.0 150010.0 182521.4 178145.2
Netherlands 32087.7 48455.6 63268.1 65081.5
Luxembourg 24228.6 21755.9 26363.3 25154.7
France 16131.5 20921.2 24344.5 23866.6
United Kingdom 18715.0 20270.3 24158.2 22617.5
Germany 9272.4 13065.1 15758.7 15004.7
Spain 7125.3 9871.1 10882.0 9866.6
Belgium 3369.5 4569.5 5308.3 4944.5
Sweden 600.2 748.4 866.3 892.6
Other EU (4) 6659.7 10352.9 11572.4 10716.6
Switzerland 9321.5 10954.9 10559.0 10007.1
Brazil 2486.4 3473.1 3954.4 4935.1
Argentina 1633.6 2127.7 2178.3 2211.3
Japan 954.1 1137.7 1249.9 1164.1
Liechtenstein 144.1 169.0 194.4 175.9
Other 19552.1 22342.9 24901.6 26460.5
T O T A L 169672.0 208635.8 244410.2 243982.3
Table 4b: Stock of Italian Direct Investment Abroad by Major
Recipient; Year End 2002-2005 (Percentage of Total)
2002 2003 2004 2005
United States 10.2 8.8 7.7 8.0
EU 69.7 71.9 74.7 73.0
of which:
Luxembourg 14.3 10.4 10.8 10.3
Netherlands 18.9 23.2 25.9 26.7
France 9.5 10.0 10.0 9.8
Germany 5.5 6.3 6.4 6.1
United Kingdom 11.0 9.7 9.9 9.3
Spain 4.2 4.7 4.5 4.0
Belgium 2.0 2.2 2.2 2.0
Sweden 0.4 0.4 0.4 0.4
Other EU (3) 3.9 5.0 4.7 4.4
Switzerland 5.5 5.4 4.3 4.1
Brazil 1.5 1.7 1.6 2.0
Argentina 1.0 1.0 0.9 0.9
Japan 0.6 0.5 0.5 0.5
Liechtenstein 0.1 0.1 0.1 0.1
Other 11.4 10.6 10.2 11.4
T O T A L 100.0 100.0 100.0 100.0
Table 5a: U.S. Investment in Italy by Economic Sector End-Year
2002-2005 (USD Millions) (2)
2002 2003 2004 2005
Agriculture 29.2 36.3 40.2 41.3
Energy 434.2 545.7 627.6 576.2
Industry 9236.0 11812.3 13607.1 12958.7
of which:
Machine 2098.1 2635.8 2979.7 2792.2
Transportation
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Equipment 621.1 782.2 902.5 830.0
Chemical 2487.5 3162.7 3689.1 3447.5
Food 1306.9 1667.1 1920.3 2003.5
Textiles 179.5 230.3 273.6 260.9
Minerals/Metals 272.4 395.5 451.9 433.3
Other 2297.5 2938.7 3390.0 3191.3
Services 5647.2 7063.8 8173.4 7874.8
of which:
Trade 690.0 853.6 987.0 933.9
Banking/
Insurance 2910.2 3505.6 4008.2 3771.0
Transportation/
Communication 456.2 582.0 666.5 636.4
Other Services 1590.8 2122.7 2511.7 2533.5
T O T A L 15373.7 19458.1 22448.3 21451.0
Table 5b: U.S. Investment in Italy by Economic Sector End-Year
2002-2005 (Percentage of Total)
2002 2003 2004 2005
Agriculture 0.2 0.2 0.2 0.2
Energy 2.8 2.8 2.8 2.7
Industry 60.3 60.7 60.6 60.4
of which:
Machine 13.7 13.6 13.3 13.0
Transportation
Equipment 4.0 4.0 4.0 3.9
Chemical 16.2 16.3 16.4 16.1
Food 8.5 8.6 8.6 9.3
Textiles 1.2 1.2 1.2 1.2
Minerals/
Metals 1.8 2.0 2.0 2.0
Other 14.9 15.0 15.1 14.9
Services 36.7 36.3 36.4 36.7
of which:
Trade 4.5 4.4 4.4 4.3
Banking/
Insurance 18.9 18.0 17.9 17.6
Transportation/
Communication 3.0 3.0 3.0 3.0
Other Services 10.3 10.9 11.1 11.8
T O T A L 100.0 100.0 100.0 100.0
Table 6a: Italian Investment in the U.S. by Economic Sector --
End-Year 2002-2005 (USD Millions) (2)
2002 2003 2004 2005
Agriculture 48.0 51.3 52.3 62.6
Energy 1727.6 1816.0 1831.8 1877.2
Industry 6749.5 7061.3 7254.8 7589.1
of which:
Machine 2484.3 2732.2 2777.2 2850.1
Transportation
Equipment 775.6 863.6 950.8 966.9
Chemical 494.8 261.6 205.2 212.5
Food 249.5 264.1 273.6 289.3
Textiles 670.1 724.7 741.6 813.5
Minerals/
Metals 1440.5 1541.9 1589.1 1637.5
Other 634.7 673.3 717.3 819.4
Services 8865.3 9491.9 9719.6 10088.5
of which:
Trade 690.0 1142.7 1177.4 1201.9
Banking/
Insurance 4179.5 4434.3 4615.7 4796.9
Transportation/
Communication 456.2 274.1 232.0 242.0
Other 3539.7 3640.8 3694.5 3847.7
T O T A L 17390.4 18420.5 18858.5 19617.5
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Table 6b: Italian Investment in the U.S. by Economic Sector --
End-Year 2002-2005 (Percentage of Total)
2002 2003 2004 2005
Agriculture 0.3 0.3 0.3 0.3
Energy 10.5 9.9 9.9 9.6
Industry 39.1 38.8 38.3 38.7
of which:
Machine 14.7 14.3 14.8 14.5
Transportation
Equipment 4.5 4.5 4.7 4.9
Chemical 2.7 2.9 1.4 1.1
Food 1.4 1.4 1.4 1.5
Textiles 3.9 3.8 3.9 4.2
Minerals/
Metals 8.2 8.3 8.4 8.3
Other 3.7 3.6 3.7 4.2
Services 50.1 51.0 51.5 51.4
of which:
Trade 6.3 4.0 6.2 6.1
Banking/
Insurance 23.6 24.0 24.1 24.5
Transportation/
Communication 1.5 2.6 1.5 1.2
Other 18.7 20.4 19.7 19.6
T O T A L 100.0 100.0 100.0 100.0
Table 7: Direct Investment by Origin and Destination End-Year 2005
(USD Millions)
Foreign Italian Net
Investment Investment Italian
in Italy Abroad Position
EU 145179.5 178145.3 32965.8
of which:
United Kingdom 25434.5 22617.5 -2817.0
Netherlands 40079.1 65081.5 25002.4
Germany 15309.3 15004.7 -304.6
France 25637.6 23866.6 -1771.0
Spain 4820.5 9866.6 5046.1
Luxembourg 24042.5 25154.7 1112.2
Belgium 1982.3 4944.5 2962.2
Sweden 3034.2 892.6 -2141.6
Other (4) 4839.5 10716.6 5877.1
Non-EU 56139.3 65837.1 9697.8
of which:
USA 21451.0 19617.5 -1833.5
Switzerland 20115.7 10007.1 -10108.6
Liechtenstein 1975.2 175.9 -1799.3
Japan 3419.1 1164.1 -2255.0
Canada 815.8 1265.6 449.8
Argentina 246.8 2211.3 1964.5
Brazil 184.2 4935.1 4750.9
Other 7931.5 29460.6 18528.9
T O T A L 201318.8 243982.3 42663.5
(1) Annual net investment flow data compiled by Embassy Economic
Section, based on Bank of Italy data and converted at the following
end-year exchange rates:
2002 2003 2004 2005
Euro/Dollar 1.057 0.894 0.805 0.805
Net = New Investment Less Disinvestment. The volatility and huge
changes from year to year in some sections can be explained in part
by the fact that listed data are "Net": New Investment Minus
Disinvestment.
(2) Compiled by the Economic Section of the Embassy based on Bank of
Italy data and converted at the following end year exchange rates:
2002 2003 2004 2005
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Euro/Dollar 0.958 0.799 0.746 0.847
(3) EU 15 data for 2002, EU 25 data for 2003-2005.
(4) Austria, Denmark, Finland, Portugal, Greece, Ireland (other EU
25 countries),plus Cyprus, Czech Republic, Estonia, Hungary,
Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia.
(5) Original data in euro and converted at the end-2005 exchange
rate of one dollar = 0.847 euro.
Sources: Italian Exchange Office And Bank Of Italy Annual Report
2005.
12. END PART TWO OF CABLE.
SPOGLI