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UNCLAS SECTION 01 OF 16 ROME 000082 
 
SIPDIS 
 
SECSTATE FOR EB/IFD/OIA 
SECSTATE PLEASE PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ETRD ELAB OPIC KTDB USTR PGOV IT
SUBJECT: INVESTMENT CLIMATE STATEMENT 2010 - ITALY 
 
REF: A) 09 STATE 124006 
 
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¶1.  SUMMARY: Following is Post's submission for 2010 Investment 
Climate Statement for Italy. End Summary. 
 
OVERVIEW AND UPDATE 
------------------- 
 
¶2.  The Government of Italy (GOI) maintains a welcoming posture to 
foreign investment and has made modest progress in addressing the 
structural economic disincentives that discourage investment, 
innovation and greater economic dynamism.  The 2009 budget, for 
example, implemented some tax benefits for start-ups and modest 
measures aimed at reducing red tape for starting businesses.  But 
significant stumbling blocks to investment remain, such as rigid 
labor laws, high input costs and taxes, and inefficient public 
services.  The current government has waged a high profile campaign 
against absenteeism and poor work habits in government offices, 
prompting protests from public sector employees. 
 
¶3.  The government's economic team has engaged primarily in efforts 
to mitigate the global recession's effects on Italian households and 
businesses, leaving structural reforms for another day.  At times 
during 2009, the GOI made overtures to foreign sovereign wealth 
funds to invest in shares of Italian parastatals and some banks, but 
it did not orchestrate a comprehensive effort to sell Italy to 
foreigners as a desirable investment destination, whether for 
portfolio or direct investment.  Italy's high debt-to-GDP ratio will 
constrain the government's latitude to further stimulate investment 
with infrastructure spending, incentives, or lower taxes. 
 
¶4.  Thus, Italy in 2009 remained a challenging place for foreigners 
to invest, all the more so given the turbulent global economy.  The 
large role of Italy's public sector, a muddled commercial law 
system, and the perception of corruption and latent economic 
nationalism discourage investment in Italy by outsiders.  The 
presence of organized crime also constitutes a deterrent to 
investment in some parts of the country.  Many Italian institutions 
and international organizations examining various aspects of Italy's 
investment climate concur in this assessment. Italy in 2009 slipped 
slightly in virtually every international NGO ranking of regulatory 
transparency and ease of doing business. 
 
¶5.  Italy's investment climate is often cited as a contributing 
factor to its low economic growth rate.  Over the last ten years, 
Italy's economy has grown significantly more slowly than the rest of 
Europe and during the 2009 global recession suffered a larger GDP 
drop (down 4.8 per cent) than most of its neighbors. 
 
 
INTRODUCTION 
------------ 
 
¶6.  Italy's economy, the seventh largest economy in the world, is 
fully diversified, and dominated by small and medium-sized firms 
(SMEs).  It is an original member of the 15 nation eurozone. 
Germany, France, and the U.S. remain Italy's most important export 
markets.  Tourism is an important source of external revenue.  Italy 
lags behind many industrialized nations as a recipient of direct 
foreign investment.  According to the UN Conference on Trade and 
Investment, Italy has bilateral investment treaties with 96 nations, 
although not with the United States (see para. 51 for full list). 
 
 
 
OPENNESS TO FOREIGN INVESTMENT 
------------------------------ 
 
¶7.  Italy welcomes and encourages foreign direct investment, but the 
government of Prime Minister Silvio Berlusconi that took office in 
April 2008 has taken only modest steps toward structural economic 
reform that could increase investment, business creation, production 
and employment. Economic policymakers have been mainly preoccupied 
addressing the effects on Italy of the severe global economic 
downturn.  The GOI has focused on measures to stimulate aggregate 
demand and demand for products of sensitive sectors such as autos 
and household durable goods.  In early 2009 the government adopted 
additional modest fiscal incentives for companies, foreign ones 
included, investing in research and some new equipment, and 
temporarily eliminated a small surtax on firms. 
 
¶8.  As an EU Member State, Italy is bound by EU treaties and 
 
ROME 00000082  002.2 OF 016 
 
 
legislation, some of which have an impact on business investment. 
Under the EU treaty's right of establishment, Italy is generally 
obliged to provide national treatment to foreign investors 
established in Italy or in another EU member state.  Exceptions 
include access to government subsidies for the film industry, 
capital requirements for banks domiciled in non-EU member countries, 
and restrictions on non-EU-based airlines operating domestic routes. 
 Italy also has investment restrictions in the shipping sector. 
 
¶9. EU and Italian anti-trust laws give EU and Italian authorities 
the right to review mergers and acquisitions over a certain 
financial threshold.  The government may block mergers involving 
foreign firms for "reasons essential to the national economy" or if 
the home government of the foreign firm applies discriminatory 
measures against Italian firms.  Foreign investors in the defense or 
aircraft manufacturing sectors are likely to encounter an opaque 
process and resistance from the many ministries charged with 
approving foreign acquisitions of existing assets or firms, most of 
which are controlled to some degree by the para-statal defense 
conglomerate Finmeccanica. 
 
¶10. The EU in 2009 ordered the GOI to recover from a US investor 
previously agreed subsidies for electricity.  The GOI had provided 
these subsidies to induce the investor to keep two plants operating 
in Italy.  The fate of the plants is up in the air, pending the GOI 
finding an acceptable mechanism to make energy available to the 
investor at a market-comparable price, i.e., close to the median 
cost of electricity in other western European countries. 
 
¶11. Foreign investors are not precluded from investing in the 
privatization of government-owned companies, except in the defense 
sector.  The privatization process has almost always entailed the 
GOI retaining a "golden share" (a government stake with controlling 
authority) in the privatized company or establishing a core group of 
Italian shareholders who agree to keep their shares for a minimum 
period.  Italy is the only EU member country to keep significant 
"golden share" regimes in privatized companies.  According to EU 
data, the Italian government retains special rights in six Italian 
firms -- ENEL (utilities), ENI (oil/gas), Finmeccanica 
(industrials/defense), Telecom Italia (telecommunications), Save 
(industrials), and Terna (utilities). 
 
¶12. The Italian Trade Commission (ICE) reported in January 2009 that 
7,152 foreign companies operate in Italy, employing 853,000 workers 
(down from a million in 2007), with overall sales of 429.5 billion 
euro.  According to ICE, the stock of foreign investment in Italy 
equals 12 percent of GDP, far less than in many EU nations. 
Approximately 77 percent of foreign companies operating in Italy are 
located in the north, with the Lombardy Region alone hosting 46 
percent.  The ICE study cites as key obstacles to foreign 
investment: labor taxes, lack of labor flexibility, red tape, and 
high corporate taxes. Net direct investment inflows in 2008 totaled 
USD 28.9 billion (equal to 1.2 percent of GDP), well below its Euro 
zone counterparts.  Notably, inflows were exceeded by outflows - USD 
33.8 billion in 2008, equal to 1.4 percent of GDP. (see para. 61). 
 
¶13. The World Economic Forum's 2009-2010 Global Competitiveness 
Guide ranked Italy 48th out of 133 countries with a CG index score 
of 4.3 on a 1-7 scale, up from 49th in 2008-2009.  Despite the 
marginal improvement, Italy still ranked well below the other G7 
countries.   The report cites as Italy's weak points the high level 
of public debt, institutional and bureaucratic inefficiencies, the 
rigidity of the labor market, the high level of corruption, 
organized crime, and the perception of a lack of independence on the 
part of the judicial system.  On the positive side, Italy's strong 
points, on which many U.S. firms in Italy concur, are sophisticated 
management in large and medium Italian companies, production of high 
quality goods, the large size of its internal market (the 7th in the 
world), the quality of health care and the primary education system. 
 
 
¶14. The 2008 "Index of Economic Freedom," published by the Wall 
Street Journal and Heritage Foundation, ranked Italy as the world's 
64th freest economy.  The study highlighted government interference 
in the economy, corruption, and a slow court system as contributing 
to Italy's ranking below several less developed nations. 
 
¶15. In its Doing Business Report for 2010, the World Bank ranks 
Italy 78th in a list of 183 countries in terms of business 
friendliness.  Italy's position worsened from 74th last year; this 
is consistent with deteriorating indicators in specific areas, such 
as building permits (75th), time to start an industrial plant 
(78th), ease of hiring workers (99th), access to credit (87th), 
 
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protection of investors (54th) and effectiveness in enforcing 
contracts (156th).  The World Bank noted that high corporate taxes 
continue to be a major problem, ranking Italy 135th.  Italy ranks 
below all other industrialized OECD countries, and below various 
developing nations.  (Source: World Bank - Doing Business 2010 
-September 2009) 
 
¶16. At the same time, some young, well-educated Italians aim to 
break the cultural bias against entrepreneurship by showcasing their 
own efforts to start new firms and calling publicly for policy 
reforms.  Unfortunately for Italy, several promising entrepreneurs 
have, in the interim, quit Italy and taken their ideas and energies 
to start firms abroad.  Most high-tech, innovative start-ups 
attempted recently in Italy, are focusing on global, and not 
exclusively Italian, markets. 
 
 
CONVERSION AND TRANSFER POLICIES 
-------------------------------- 
 
¶17. In accordance with EU directives, Italy has no foreign exchange 
controls.  There are no restrictions on currency transfers, only 
reporting requirements.  Banks are required to report any 
transaction over 15,000 euros (USD 22,500) due to money laundering 
and terrorism financing concerns.  Profits, payments, and currency 
transfers may be freely repatriated.  Residents and non-residents 
may hold foreign exchange accounts. 
 
 
EXPROPRIATION AND COMPENSATION 
------------------------------ 
 
¶18. The Italian constitution permits expropriation of private 
property for "public purposes," defined as essential services or 
measures indispensable for the national economy, with fair and 
timely compensation.  There are a few long-standing disputes in 
Italy involving U.S. citizens who assert that municipal governments 
unjustly expropriated their real property or inadequately 
compensated them.  These disputes do not reflect systematic GOI 
discrimination against U.S. investments, but highlight how Italy's 
ineffective judicial and dispute settlement mechanisms may 
discourage investment. 
 
 
DISPUTE SETTLEMENT 
------------------ 
 
¶19. Though notoriously slow (civil trials average seven years in 
length), the Italian legal system meets generally recognized 
principles of international law, with provisions for enforcing 
property and contractual rights.  Businessmen and travelers to Italy 
should be aware, however, that the Italian legal system does not 
have some of the basic rights protections found in U.S and other 
European laws.  Jury members are selected at random but are not 
vetted for prejudices nor are they sequestered during trials; 
accordingly, negative or inaccurate news stories can prejudice 
outcomes of trials.  Italy has a written and consistently applied 
commercial and bankruptcy law.  While the Italian judiciary is 
considered independent of the government, parties to disputes 
sometimes accuse Italian judges of political partisanship.  Foreign 
investors in Italy can choose among different means of dispute 
resolution, including legally binding arbitration.  Italian courts 
accept and enforce foreign and arbitral panel judgments only upon 
request, however, which puts the issue back into the Italian 
judiciary. 
 
¶20. At the end of 2007, the GOI approved new bankruptcy regulations 
analogous to U.S. Chapter 11 restructuring, to provide more 
flexibility between firms and their creditors to reach a solution 
before declaring bankruptcy.  The judiciary's role in bankruptcy 
proceedings has been drastically limited to simplify and expedite 
the process. 
 
¶21. Italy is a member of the World Bank's International Center for 
the Settlement of Investment Disputes (ICSID).  Italy has signed and 
ratified the Convention on the Settlement of Investment Disputes 
Between States and Nationals of Other States, and is a signatory of 
the New York Convention of 1958 on the Recognition and Enforcement 
of Foreign Arbitral Awards. 
 
 
PERFORMANCE REQUIREMENTS/INCENTIVES 
----------------------------------- 
 
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¶22. The GOI is in compliance with WTO Trade-Related Investment 
Measures (TRIMS) obligations.  Foreign investors face specific 
performance requirements only in the telecommunications sector. 
While this has not prevented foreign investment in 
telecommunications, a notable lack of transparency in the sale of 
Telecom Italia drove a potential U.S. investor away in 2007. 
 
¶23. The GOI offers modest incentives to encourage private sector 
investment in economically depressed regions, particularly southern 
Italy.  The incentives are available to foreign investors as well, 
and U.S. companies can usually access grants if the planned 
investment is located in priority (less developed) regions and if 
the companies have subsidiaries in the EU or are partnered with 
local firms. 
 
¶24. The Minister of Education, University and Research has 
identified, funded, and signed Framework Program Agreements with 
eleven "Technology Districts" and public-private joint laboratories 
focused on strategic sectors.  The GOI has created Technology 
Districts to facilitate cooperation between public and private 
researchers and venture capitalists, support the research and 
development of key technologies, strengthen industrial research 
activities, and promote innovative behavior in small- and 
medium-sized enterprises. 
 
¶25. The Italian tax system does not discriminate between foreign and 
domestic investors.  The 2008 budget reduced corporate income tax 
(IRES) rates by 5.5 nominal points from 33 to 27.5 percent, and 
trimmed the regional business tax (IRAP) from 4.35 to 3.9 percent. 
Such cuts were in response to increased EU-wide competition for 
investment, particularly as the enlargement of the EU to 27 members 
ushered in various low cost, low tax East European states. Germany's 
2007 corporate tax rate cut rendered Italy's corporate tax rate the 
highest in the EU. The U.S. and Italy enacted in 2009 an income tax 
agreement to prevent double-taxation of each others' nationals and 
firms, and to improve information sharing between tax authorities. 
 
¶26. The GOI has tried to off-set the effect of corporate tax cuts on 
public revenue by introducing compensatory measures that keep 
effective rates of taxation high.  They include: 
 
-- setting new limits to the deductibility of interest; 
 
-- abolishing accelerated depreciation; and 
 
-- revising the tax treatment of consolidated reporting. 
 
In addition, successive governments have sought to improve 
enforcement of existing tax laws. 
 
 
RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT 
-------------------------------------------- 
 
¶27. There is no limitation in the Italian constitution or civil law 
on the right to private ownership and establishment of investments. 
 
 
PROTECTION OF PROPERTY RIGHTS 
----------------------------- 
 
¶28. Inadequate enforcement of Intellectual Property Rights (IPR) 
remains a serious problem in Italy. While anti-piracy and 
anti-counterfeiting laws on the books are widely regarded as 
adequate, relatively few IPR cases are brought to trial. Judges 
still regard IPR violations (and copyright violations in particular) 
as petty offenses, and the magistracy is a weak link in combating 
piracy in Italy.  The Italian Finance Police (GDF) and Italy's 
Customs Police are active in combating IPR theft, but few cases 
reach final sentencing. Italy remains on the Special 301 Watch List 
due to insufficient IPR enforcement and insufficient progress to 
combat internet piracy. 
 
¶29. Italy's restrictive interpretation of EU privacy laws prevents 
IP rights holders from monitoring downloading/uploading of 
copyrighted content over peer-to-peer networks.  This makes it 
virtually impossible for rights holders to pursue civil or criminal 
actions against infringers.  Currently there are no agreements 
between Internet Service Providers and rights holders on standard 
notice and take-down procedures. 
 
¶30. Copyrighted works sold in Italy generally must bear a sticker 
 
ROME 00000082  005.2 OF 016 
 
 
issued by SIAE, Italy's royalty collection agency operating under 
loose authority from the Ministry of Culture.  Business software is 
exempted, though obtaining this exemption requires some (tedious) 
paperwork.  The music and film industries previously supported 
application of the sticker, but are now dissatisfied with the 
system, asserting it has become overly burdensome, costly, and has 
failed to provide adequate protection from piracy. 
 
¶31. The GOI has pursued the following new initiatives to address the 
lack of IPR protection, though not all have been successful: 
 
- The Economic Development Ministry in 2009 created a General 
Directorate for Intellectual Property to take on functions 
previously shared between the Italian Patent and Trademark Office 
and the Anti-Counterfeiting High Commission.  The Directorate has 
begun efforts to obtain better data on protection of IPR protection 
efforts and to educate businesses and the public on the importance 
of intellectual property to the nation's economy.  The Directorate 
has also expressed an interest in collaborating with the USG on IPR 
protection projects.  No tangible results for these efforts are yet 
evident. 
 
- The Secretary General of the Prime Minister's Office in 2009 
chaired an inter-ministerial anti-piracy committee. The committee 
hosted a series of hearings, but they did not result in an 
anti-piracy action plan or in any GOI action on piracy. 
 
- An economic development bill passed by parliament increased 
criminal penalties for trademark infringement. 
 
¶32. Italy is a member of the Paris Union International Convention 
for the Protection of Industrial Property (patents and trademarks) 
to which the United States and about 85 other countries adhere. 
U.S. citizens generally receive national treatment in acquiring and 
maintaining patent and trademark protection in Italy.  After filing 
a patent application in the United States, a U.S. citizen is 
entitled to a 12-month period within which to file a corresponding 
application in Italy and receive rights of priority.  Patents are 
granted for 20 years from the effective filing date of application 
and are transferable.  U.S. authors can obtain copyright protection 
in Italy for their work first copyrighted in the United States, 
merely by placing on the work, their name, date of first 
publication, and the symbol (c). 
 
 
TRANSPARENCY OF THE REGULATORY SYSTEM 
------------------------------------- 
 
¶33. Italy is subject to single market directives mandated by the EU, 
which are intended to harmonize regulatory regimes among EU 
countries.  In reality, the average firm in Italy faces an uphill 
climb as regards compliance with business regulations.  According to 
a 2004 World Bank study, an entrepreneur wishing to start a business 
in Italy must follow 16 procedures, spend an average of 62 days, and 
pay around USD 5,000 in fees. The study found that it costs more to 
open a business in Italy than anywhere else in Europe, with the 
exceptions of Greece and Austria.  In its 2009 budget law, the 
government reintroduced provisions to enable entrepreneurs to "open 
a business in a day", working through the Italian Chamber of 
Commerce.  Businesses report, however, that such a mechanism is as 
yet inoperable and does not exempt firms from fulfilling 
requirements established by local governments. 
 
¶34. Various foreign firms, including some American ones, report that 
they have been harassed by the GOI at the instigation of politically 
connected competitors.  A web of sometimes contradictory laws and 
regulations serves as a useful tool for vested interests to use 
against foreign upstarts.  In addition, in some industries such as 
new media and financial services, investors complain that local 
judicial authorities seem to lack the technical capacity to apply 
appropriately Italian laws on, for example, consumer protection, 
IPR, and competition, especially when these lag process and product 
innovations in the market.  For example, local prosecutors are 
seeking indictments against US financial services firms - among 
others - for allegedly violating usury laws and for allegedly 
misleading local government finance officials into inappropriate 
investments. 
 
 
EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT 
--------------------------------------------- ----- 
 
¶35. Financial resources flow relatively freely in Italian financial 
 
ROME 00000082  006.2 OF 016 
 
 
markets and capital is allocated mostly on market terms.  Foreign 
participation in Italian capital markets is not restricted.  While 
foreign investors may obtain capital in local markets and have 
access to a variety of credit instruments, access to equity capital 
is difficult.  Italy has a relatively underdeveloped capital market 
and businesses have a long standing preference for credit financing. 
 According to the Venture Capital Monitor, in the period 2004-2008 
venture capital funds invested in 89 start ups, most of them located 
in the north.  Only about 15 of these deals, amounting to 250 
million euro, occurred in the start-ups' critical "early stage". 
What little venture capital exists is usually provided by 
established commercial banks and a handful of venture capital funds. 
 "Angel investing" only began to take root in 2008; an earlier 
effort in this area was snuffed out by the dot-com bust. 
 
¶36. The Italian stock exchange ("Borsa Italiana") is relatively 
small -- fewer than 300 companies -- and is effectively an 
inaccessible source of capital for most Italian firms.  In 2007, the 
London Stock Exchange purchased the Borsa, raising expectations that 
governance standards and transparency of the Milan market would 
improve.  In an effort to improve accountability and competition in 
the wake of the 2003-04 collapse of the dairy firm Parmalat and the 
scandal which ensued, Italy's Parliament approved a law in December 
2005 to overhaul the Bank of Italy (BOI) and improve corporate 
governance and oversight. The law also strengthened the powers of 
the Italian Companies and Stock Exchange Commission (CONSOB), the 
GOI's securities regulatory body, while reducing the BOI's scope in 
this area. 
 
¶37. Financial services companies incorporated in another EU member 
state may offer investment services and products in Italy without 
establishing a local presence, operating under authorization from 
CONSOB.  In the wake of the 2008 global financial crisis and losses 
in equity markets, Italian policymakers and financial institutions 
have called for stricter regulation and supervision of financial 
institutions, as well as convergence and standardization of norms 
across the EU.  Meanwhile, U.S. and other foreign banks complain 
that Italian interpretation of EU financial regulations tends to be 
stricter than in other countries.  They also note that Italian tax 
rates for banks are higher than the EU average and have been rising 
the last two years.  Still, the country's foreign bank association 
continues to assert that Italy is an attractive market, especially 
for project finance. 
 
¶38. Most non-insurance investment products are marketed by banks, 
and tend to be debt instruments.  Italian retail investors are 
conservative, valuing the safety of government bonds over most other 
investment vehicles. Indeed, in 2008, 64 percent of trading on the 
Borsa was carried out by foreign brokerage houses.  Only seven 
percent of Italian households own Italian company stocks directly. 
Of those who do own stocks, the weight of direct stock shareholding 
in their portfolios averages around 22 percent.  A few banks have 
established private banking divisions to cater to high net worth 
individuals with a broad array of investment choices, including 
equities and mutual funds. 
 
¶39. There are no restrictions on foreigners engaging in portfolio 
investment in Italy.  Any Italian or foreign investor acquiring a 
stake in excess of two percent of a publicly traded Italian 
corporation must inform CONSOB, but does not require its approval. 
Any Italian or foreign investor seeking to acquire or increase its 
stake in an Italian bank equal to or greater than ten percent must 
be authorized by the Bank of Italy. 
 
¶40. Thanks to conservative lending practices and a lower degree of 
exposure to the toxic, risky instruments that were at the center of 
the 2008 global financial crisis, Italian banks avoided the worst of 
the crisis.  However, policymakers throughout 2009 remained 
concerned about the banking sector's ability and/or willingness to 
maintain an adequate supply of financing to the economy during the 
economic downturn.  While some government officials have criticized 
the industry publicly, there is no discernible government effort 
underway to interfere with private banking activity or operational 
decisions. 
 
¶41. The banking sector has undergone significant consolidation in 
the last decade, with about 60 percent of total Italian banking 
assets involved.  In 2009 a handful of mid-size banks and Italy's 
biggest leasing company merged or were acquired by competitors. 
Currently, the country's largest banks are: Unicredit Group, Intesa 
San Paolo, Monte dei Paschi di Siena, Banco Popolare, and UBI Banca. 
 The assets of Italy's five largest banks account for 52.1 percent 
of total banking assets. 
 
ROME 00000082  007.2 OF 016 
 
 
 
¶42. Efficiencies from mergers and the expansion of online and other 
low-cost banking options are expected to have an impact on retail 
banking fees, currently among the highest in Europe.  Possibly 
contributing to this trend are class actions promoted by consumer 
associations against several large banks.  The Bank of Italy has 
urged Italian banks to become more competitive by cutting high 
transaction charges and improving services. 
 
¶43. A prohibition on non-bank companies (either Italian or foreign) 
acquiring more than 15 percent of a bank's capital was abolished by 
the legislature in late 2008, with the aim of implementing a new 
European directive.  Firms have used complex cross-shareholding 
arrangements to fight off takeover attempts in the financial sector. 
 Still, the presence of foreign intermediaries in the Italian market 
increased in the last several years.  In 2005, the Dutch Bank 
ABN-AMRO obtained control of an Italian medium-sized bank, Banca 
Antonveneta; in 2006, the French banking group BNP Paribas acquired 
control of Banca Nazionale del Lavoro, one of Italy's primary banks; 
Credit Agricole acquired a controlling interest in Cassa di 
Risparmio di Firenze, di Parma e Piacenza (subsequently acquired by 
Banca Intesa)and Banca Popolare Friuladria; and in 2008, U.S.-based 
GE Capital purchased Interbanca from Spanish bank Santander.  No 
further significant acquisitions or mergers occurred in 2009 as the 
industry digested the previous years' deals. 
 
¶44. At end of 2008, 82 subsidiaries of foreign groups accounted for 
11.7 percent of system assets.  A year earlier, 21 subsidies of 
foreign banks accounted for 9.3 percent of system assets. 
Throughout 2008-09, however, various foreign banks closed or 
significantly scaled back operations in Italy, with accompanying 
layoffs and lost business. 
 
 
POLITICAL VIOLENCE 
------------------ 
 
¶45. Political violence is not a threat to foreign investments in 
Italy, but corruption, especially associated with organized crime, 
can be a major hindrance, particularly in the south - see next 
section. 
 
 
CORRUPTION 
---------- 
 
¶46. Corruption and organized crime are significant impediments to 
investment and economic growth in Italy. Transparency 
International's (TI) Corruption Perceptions Index 2009 ranked Italy 
63rd out of 180 countries evaluated, down from 55th in 2008 and 41st 
two years ago.  While better than 117 other countries, Italy lags 
behind most of its G-8/EU/OECD partners, but also below Turkey and 
Namibia and just above Saudi Arabia.  TI's International Corruption 
Perceptions Index is an annual poll of polls ranking countries for 
perceived public-sector corruption.  TI has for years raised concern 
about the dampening of anti-corruption efforts in Italy stemming 
from large-scale ownership of media outlets by Prime Minister 
Berlusconi. 
 
¶47. According to TI, less than 30 percent of Italy's population 
believes the government is effective in fighting corruption.  In 
TI's latest survey Italians rated their Parliament and political 
parties as "very corrupt".  TI's "Bribe Payer's Index" ranked Italy 
in the lower third of countries, in the same group as Saudi Arabia, 
Brazil and Malaysia, and last among the countries of Western Europe. 
 The NGO Global Integrity (GI) noted that Italy has poor mechanisms 
to fight corruption in public administration and lacks effective 
laws on conflict of interest.  GI also found serious weaknesses in 
the protection of 'whistle-blowers' and in the regulations governing 
political party financing.  Finally, the World Bank in its 2007 
"Governance Matters" report found Italy steadily deteriorating in 
its control of corruption.  Among OECD countries only Mexico and 
Turkey had lower anti-corruption ratings from the World Bank. 
 
¶48. One of PM Berlusconi's first acts in office was to eliminate the 
High Commissioner for Anti-corruption.   Later in 2008, the GOI 
established, at the instigation of Transparency International, the 
Anticorruption and Transparency Service (SAeT), tasked to monitor 
corruption trends, establish guidelines for public ethics, 
participate in international anti-corruption efforts and publicize 
its work. SAeT is charged also with streamlining and speeding 
payments from public entities to private contractors and service 
providers. Though TI lobbied the government to have SAeT adopt TI's 
 
ROME 00000082  008.2 OF 016 
 
 
recommended institutional model, it appears SAeT's powers remain 
very limited.  It has not as yet been a prominent player in 
anti-corruption efforts. In its first report in March 2009, SAeT 
estimated that corruption in public administration constitutes a 
burden ranging from 50 to 60 billion, i.e. almost 1,000 per 
capita.  The report characterized corruption as an immoral and 
hidden tax on families that erodes and slows economic growth. 
 
¶49. Italy ratified the 1997 OECD Convention on Combating Bribery in 
September 2000.  However, with the recent reorganization of the 
Corruption Commission, it is unclear whether Italy is able to 
prosecute the bribery of foreign officials, leaving it unable to 
fulfill its obligations under the convention.  Although Italy has 
signed the United Nations Convention against Corruption, as of 
January 2008 it has yet to ratify the document. Corruption is 
punishable under Italian law.  As in all judicial processes, much 
discretion regarding punishment is left to the presiding judge. 
Most corruption in the recent past has involved government 
procurement or bribes to tax authorities.  Bribes are not considered 
deductible business expenses under Italian tax law. 
 
¶50. Organized crime is present throughout Italy, but is particularly 
prevalent in four regions of the south (Sicily, Calabria, Campania, 
and Apulia).  In November 2008, Confesercenti, the Italian 
confederation of trade, tourism, and service company operators, 
released a report estimating that organized crime (Mafia, Camorra, 
'Ndrangheta and Sacra Corona Unita) had a turnover of 130 billion 
euros, including legitimate commercial activities accounting for 92 
billion euros, or 6 per cent of Italy's GDP.  Organized crime is 
involved in racketeering, loan sharking, drug smuggling, illegal 
toxic waste disposal, the manufacture and distribution of pirated 
and counterfeit products, and prostitution.  Confesercenti estimates 
loan sharking accounts for 15 billion euros of Mafia income. 
Narcotics' trafficking is by far the most profitable activity, 
traded across Europe and worth 59 billion euros.  The Confesercenti 
report underscored recent warnings by anti-Mafia prosecutors that 
criminal gangs were expanding their activities into trade, tourism, 
the gaming industry, restaurants, construction, waste disposal and 
the property and health sectors.  The report estimated that about 
150,000 shopkeepers pay the pizzo, or protection money, to Mafia 
gangs, amounting to 6 billion euros a year. For example, a stall in 
a food market in Naples has to pay 5 - 10 euros a day, while a 
Palermo construction site may hand over 10,000 euros a month. 
According to the press, loan-sharking seems to be increasing as 
banks have become more reluctant to lend in the current difficult 
economic environment.  Organized crime is not limited to the south; 
in fact, the main crime syndicates are heavily involved in money 
laundering throughout the country and abroad. 
 
 
BILATERAL INVESTMENT AGREEMENTS 
------------------------------- 
 
¶52.  As of December 2008, Italy has bilateral investment agreements 
with the following countries: 
 
Albania 
Algeria 
Angola 
Argentina 
Armenia 
Azerbaijan 
Bangladesh 
Bahrain 
Barbados 
Belarus 
Belize (signed, not enforced) 
Bolivia 
Bosnia and Herzegovina 
Brazil (signed, not enforced) 
Bulgaria 
Cameroon 
Cape Verde (signed, not enforced) 
Chad 
Chile 
China 
Congo 
Cote d'Ivoire (signed, not enforced) 
Croatia 
Cuba 
Czech Republic (not into force) 
Cyprus (signed, not enforced) 
Democratic Republic of Congo (signed, not enforced) 
 
ROME 00000082  009.2 OF 016 
 
 
Dominican Republic (signed, not enforced) 
Ecuador 
Egypt 
Eritrea 
Estonia 
Ethiopia 
Gabon 
Georgia 
Ghana (signed, not enforced) 
Guatemala 
Guinea 
Hong Kong, China 
Hungary (not into force) 
India 
Indonesia 
Iran, Islamic Republic of 
Jamaica 
Jordan 
Kazakhstan 
Kenya 
Korea, DPR of (signed, not enforced) 
Korea, Republic of 
Kuwait 
Latvia (not into force) 
Lebanon 
Libya 
Lithuania 
Macedonia, Republic of 
Malawi (signed, not enforced) 
Malaysia 
Malta (signed, not enforced) 
Mauritania (signed, not enforced) 
Mexico 
Moldova, Republic of 
Mongolia 
Morocco 
Mozambique 
Namibia 
Nicaragua 
Nigeria 
Oman 
Pakistan 
Panama (signed, not enforced) 
Paraguay (signed, not enforced) 
Peru 
Philippines 
Poland 
Qatar 
Romania 
Russian Federation 
Saudi Arabia 
Slovakia (not into force) 
Slovenia (not into force) 
South Africa 
Sri Lanka 
Sudan (signed, not enforced) 
Syrian Arab Republic 
Tunisia 
Turkey 
Turkmenistan (signed, not enforced) 
Uganda 
Ukraine 
United Arab Emirates 
Tanzania, United Republic of 
Uruguay 
Uzbekistan 
Venezuela (signed, not enforced) 
Vietnam 
Yemen 
Zambia (signed, not enforced) 
Zimbabwe (signed, not enforced) 
 
 
OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS 
-------------------------------------------- 
 
¶52. The U.S. Overseas Private Investment Corporation (OPIC) does not 
operate in Italy, as it is a developed country.  Italy's Export 
Credit Agency, SACE, is a member of the World Bank's Multilateral 
Investment Guarantee Agency (MIGA). 
 
 
LABOR 
 
ROME 00000082  010.2 OF 016 
 
 
----- 
 
¶53. Italy's unemployment rate, at 8.5 percent in December 2009, has 
crept up as a decade of low growth and the slowing world economy 
take their toll.  The December 2009 data is the highest figure since 
March 2004.   Post and various economists expect the unemployment 
rate to remain high in 2010 and 2011.  Traditional regional labor 
market disparities remain unchanged, with the southern third of the 
country posting a significantly higher unemployment rate compared to 
northern and central Italy.  Despite these differences, internal 
migration within Italy remains modest, while industry-wide national 
collective bargaining agreements irrationally set equal wages across 
the entire country.  Labor shortages in the North are often filled 
by unskilled and semi-skilled immigrants from Eastern Europe and 
North Africa. 
 
¶54. Italy's labor force is well-educated.  According to a 2006 
national survey, 9.7 percent of people aged 15 and older held 
university degrees and 42 percent completed upper secondary 
education.  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 education do not earn substantially more than 
persons with upper secondary educations.  As a result, Italy has 
experienced a mild brain-drain among the highly-educated, 
entrepreneurial young.  Firms interested in investing in Italy may 
have difficulties finding specialized young Italian employees. 
 
¶55. On paper, companies may bring in a non-EU employee after the 
government-run employment office has certified that no qualified, 
unemployed Italian is available to fill the position.  In reality, 
the cumbersome and lengthy process acts as a deterrent to foreign 
firms seeking to comply with the law.  Work visas are subject to 
annual quotas, although intra-company transfers are exempt from 
quota limitations. 
 
¶56. There are legal obstacles to hiring and firing workers although 
in recent years, the Italian labor market has become slightly 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 to 
adding permanent employees. 
 
¶57. Italy is an International Labor Organization (ILO) member 
country.  Terms and conditions of employment are periodically fixed 
by collective labor agreements in different professions.  Most 
Italian 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 irrespective of geographical location. 
 
 
FOREIGN TRADE ZONES/FREE PORTS 
------------------------------ 
 
¶58. The main free trade zone in Italy is located in Trieste, in the 
northeast.  Legislation provides for creating others in Genoa and 
Naples, but has not yet been implemented. A FTZ in Venice operated 
for a period but is being restructured.  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: 
 
-- As regards Trieste, customs duties deferred for 180 days from the 
time the goods leave the free trade zone to enter another EU 
country. 
 
 
ROME 00000082  011.2 OF 016 
 
 
-- The goods may undergo transformation free of any customs 
restraints. 
 
-- Absolute exemption from any duties on products coming from a 
third country and re-exported to a non-EU country. 
 
¶59. In December 2009 the GOI implemented a simplified version of the 
regulation of urban free zones (aimed to accelerate the creation of 
micro-companies and to stimulate employment) which are expected to 
involve 23 local governments, mostly in the south.  There is no 
customs duty exemption in these zones. 
 
 
U.S. COMPANIES IN ITALY 
----------------------- 
 
¶60. 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 
------------------------------------ 
 
¶61. Italy 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 2008 totaled USD 
28.9 billion (equal to 1.2 percent of GDP), well below its Euro zone 
counterparts.  Notably, inflows were exceeded by outflows - USD 33.8 
billion in 2008 (equal to 1.4 percent of GDP). 
 
Data on Italian Investment Inflows (direct and portfolio) is 
available at 
 
http://www.unctad.org/en/docs/wir2007_en.pdf 
 
or 
 
http://www.bancaditalia.it/pubblicazioni /relann/rel08/rel08it 
 
Table 1: Italian Foreign Direct Investment Inflows by Economic 
Sector (Net) 2005-2008 (USD Millions) (1) (*) 
 
                  2005       2006       2007       2008 
 
Agriculture      511.8     -662.1       44.4      252.9 
 
Energy         10057.1     4104.3     4387.1     7481.0 
 
Industry        6996.3     7549.0     6629.0     4254.4 
of which: 
 
Machine         1314.3     4871.9     5201.6    -1168.1 
Chemical         441.0      168.3      305.1     1504.4 
Food            2388.8     1839.2    -1033.6      564.3 
Textiles         544.1      810.3     1289.0      811.4 
Mineral/Metal   1315.5      143.2      289.0      843.6 
Other            992.6     -283.9      577.0     1698.8 
 
Building and 
Public Works     205.0      283.9      239.3      314.3 
 
Services         925.5    18639.5    20919.3    16560.0 
 of which: 
Banking/ 
Insurance       1207.5     8810.3     7556.4     8090.6 
Trade            653.4     3570.4     2106.2     -290.9 
Transportation/ 
Communication -11468.3     2027.6     5293.0     2068.7 
Other Services 
(Not For Sale) 10532.9     4231.2     5963.7     6691.6 
 
T O T A L      18695.7    29914.6    32319.1    28862.6 
 
 
Table 2: Italian Direct Investment Outflows by Economic Sector (Net) 
2005-2008 (USD Millions) (1) (*) 
 
                 2005       2006       2007       2008 
 
Agriculture      70.8       42.7      143.8      348.0 
 
 
ROME 00000082  012.2 OF 016 
 
 
Energy         2675.8     3775.1    37061.8    10388.9 
 
Industry       7629.8    13501.3    12364.3     8719.3 
 of which: 
 
Machine        3684.5     9218.6     5922.0     2779.2 
Chemical       1730.4     2267.6     2665.3     1991.2 
Food            206.2      623.1      657.3     1008.8 
Textiles        411.2      275.1      469.1      301.2 
Mineral/Metal   600.0     -224.9     1610.2      981.0 
Other           997.5     1341.8     1040.4     1657.9 
 
Building And 
Public Works    159.0     -113.1      114.2      252.9 
 
Services       7444.7    16881.9    12106.2    14118.4 
 of which: 
Banking/ 
Insurance      5164.6    10797.7      959.7     5830.4 
Trade           923.0     1075.4     1426.1     1678.4 
Transportation/ 
Communication   110.6     2069.1     1658.6     -552.6 
Other Services 
(Not For Sale) 1264.6     2939.7     8061.8     7162.2 
 
T O T A L     17980.1    34087.9    61790.3    33827.5 
 
 
 
Table 3a: Stock of Foreign Direct Investment in Italy by Major 
Investors; Year End 2005-2008 (USD Millions) (1) 
 
                   2005      2006      2007      2008 
 
United States   21451.0   25826.1   25581.3   31707.6 
 
EU (3)         145179.5  185773.4  238404.1  252374.3 
 of which: 
 France         25637.5   37040.8   44210.8   45204.8 Netherlands 
 40079.1   54304.3   72411.4   81324.9 
 United Kingdom 25434.5   30461.1   35584.2   35377.1 
 Germany        15309.3   11263.5   10959.0   10062.1 
 Luxembourg     24042.5   27911.7   31916.5   34642.7 
 Sweden          3034.2    3533.6    4203.5    4012.7 
 Belgium         1982.3    2353.1    7225.5    6789.5 
 Spain           4820.5   11764.2   18014.6   18059.3 
 Other EU (4)    4839.4    7141.0   13878.5   16901.2 
 
Switzerland     20115.7   23446.6   26269.4   25435.0 
Liechtenstein    1975.2    2330.7    2685.2    2638.4 
Japan            3419.1    3967.1    4272.3    4187.9 
Argentina         246.8     288.5     329.4     577.7 
Brazil            184.2     320.2     373.4     577.7 
Other            8747.3   10430.8   10781.8    5381.4 
 
T O T A L      201318.8  252383.4  313767.2  323706.2 
 
Table 3b: Stock Of Foreign Direct Investment In Italy by Major 
Investors; Year End 2005-2008 (Percentage of Total) 
 
                    2005      2006      2007      2008 
 
United States       10.7      10.2       9.4       9.8 
 
EU                  72.1      73.6      76.0      78.0 
 France             12.7      14.7      14.1      14.0 
 Netherlands        19.9      21.5      28.8      25.1 
 United Kingdom     12.6      12.1      11.3      10.9 
 Germany             7.6       4.5       3.5       3.1 
 Luxembourg         11.9      11.1      10.2      10.7 
 Sweden              1.5       1.4       1.3       1.2 
 Belgium             1.0       0.9       2.3       2.1 
 Spain               2.4       4.7       5.7       5.6 
 Other EU (3)        2.4       2.7       4.4       5.3 
 
Switzerland         10.0       9.3       8.5       7.9 
Liechtenstein        1.0       0.9       0.9       0.8 
Japan                1.7       1.6       1.4       1.3 
Argentina            0.1       0.1       0.1       0.1 
Brazil               0.1       0.1       0.1       0.2 
Other                4.3       4.2       3.4       1.6 
 
T O T A L          100.0     100.0     100.0     100.0 
 
ROME 00000082  013.2 OF 016 
 
 
 
 
Table 4a: Stock Of Italian Direct Investment Abroad by Major 
Recipient; Year End 2005-2008 (USD Millions) (2) 
 
                   2005      2006      2007      2008 
 
United States   19617.5   26118.6   27439.2   25974.6 
 
EU             178145.2  217375.5  306708.6  309041.0 
 Netherlands    65081.5   89822.1  117453.9  123124.3 
 Luxembourg     25154.7   22632.4   26131.8   25865.8 
 France         23866.6   29574.4   35262.1   34128.5 
 United Kingdom 22617.5   24847.2   26086.4   20378.5 
 Germany        15004.7   18126.5   22153.7   21211.9 
 Spain           9866.6   12350.5   53197.7   50532.5 
 Belgium         4944.5    6254.3    7404.1   11118.6 
 Sweden           892.6    1087.0    1149.3     901.1 
 Other EU (3)   10716.6   12681.1   17869.7   21779.8 
 
Switzerland     10007.1   11411.1   12838.9   13531.1 
Brazil           4935.1    5645.6    7404.1    5611.6 
Argentina        2211.3    2308.3    2298.7    2162.4 
Japan            1164.1    1196.2    1320.6    1658.2 
Liechtenstein     175.9     200.3     222.5     214.7 
Other           26460.5   41685.1   47890.2   51187.8 
 
T O T A L      243982.3  305940.7  407518.3  410885.6 
 
 
Table 4b: Stock of Italian Direct Investment Abroad by Major 
Recipient; Year End 2005-2008 (Percentage of Total) 
 
                   2005      2006      2007      2008 
 
United States       8.0       8.5       6.7       6.3 
 
EU                 73.0      71.1      75.3      75.2 
of which: 
 Luxembourg        10.3       7.4       6.4       6.3 
 Netherlands       26.7      29.4      28.8      30.0 
 France             9.8       9.7       8.7       8.3 
 Germany            6.1       5.9       5.4       5.2 
 United Kingdom     9.3       8.1       6.4       5.0 
 Spain              4.0       4.0      13.1      12.3 
 Belgium            2.0       2.0       1.8       2.7 
 Sweden             0.4       0.4       0.3       0.2 
 Other EU (3)       4.4       4.2       4.4       5.2 
 
Switzerland         4.1       3.7       3.2       3.3 
Brazil              2.0       1.8       1.7       1.4 
Argentina           0.9       0.8       0.6       0.5 
Japan               0.5       0.4       0.3       0.4 
Liechtenstein       0.1       0.1       0.1       0.1 
Other              11.4      13.6      12.1      12.4 
 
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 
2005-2008 (USD Millions) (2) 
 
                   2005      2006      2007      2008 
 
 
Agriculture        41.3      46.1      52.7      55.1 
Energy            576.2     678.5     803.8     867.2 
 
Industry        12958.7   15080.4   17692.5   15374.3 
 of which: 
Machine          2792.2    3205.5    4024.9    2353.1 
Transportation 
Equipment         830.0     971.0    1121.5     812.1 
Chemical         3447.5    4031.6    4642.8    4526.8 
Food             2003.5    2321.5    2635.4    2528.2 
Textiles          260.9     304.3     355.8     341.8 
Minerals/Metals   433.3     502.0     578.3     572.0 
Other            3191.3    3744.4    4333.8    4240.4 
 
Services         7874.8   10021.1   11032.3    9678.0 
 of which: 
Trade             933.9    1097.5    1259.2    1233.1 
Banking/ 
 
ROME 00000082  014.2 OF 016 
 
 
Insurance        3771.0    4789.2    5386.5    3918.1 
Transportation/ 
Communication     636.4    1055.3    1199.1    1176.6 
Other Services   2533.5    3079.1    3187.5    3350.3 
T O T A L       21451.0   25826.1   29581.3   25974.6 
 
 
Table 5b: U.S. Investment in Italy by Economic Sector End-Year 
2005-2008  (Percentage of Total) 
 
                   2005      2006      2007      2008 
 
Agriculture         0.2       0.2       0.2       0.2 
 
Energy              2.7       2.6       2.7       3.3 
 
Industry           60.4      58.4      59.8      59.2 
 of which: 
Machine            13.0      12.4      13.6       9.1 
Transportation 
Equipment           3.9       3.8       3.8       3.1 
Chemical           16.1      15.6      15.7      17.4 
Food                9.3       9.0       8.9       9.7 
Textiles            1.2       1.2       1.2       1.3 
Minerals/ 
Metals              2.0       1.9       2.0       2.2 
Other              14.9      14.5      14.6      16.4 
 
Services           36.7      38.8      37.3      37.3 
 of which: 
Trade               4.3       4.2       4.3       4.7 
Banking/ 
Insurance          17.6      18.5      18.2      15.1 
Transportation/ 
Communication       3.0       4.1       4.0       4.5 
Other Services     11.8      12.0      10.8      13.0 
 
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 2005-2008 (USD Millions) (2) 
 
                   2005      2006      2007      2008 
 
Agriculture        62.6      71.1      71.7      66.4 
 
Energy           1877.2    2075.1    2079.1    2066.4 
 
 
Industry         7589.1   13080.4   13516.8   13967.5 
 of which: 
Machine          2850.1    7910.4    8007.3    8113.0 
Transportation 
Equipment         966.9    1001.3    1045.4    1083.3 
Chemical          212.5     332.0     411.4     593.2 
Food              289.3     304.3     320.6     315.0 
Textiles          813.5     851.1     882.9     889.8 
Minerals/ 
Metals           1637.5    1724.6    1877.0    1973.2 
Other             819.4     956.7     972.2    1000.0 
 
Services        10088.5   10892.0   11771.6   15607.3 
 of which: 
Trade            1201.9    1241.1    1276.7    1343.2 
Banking/ 
Insurance        4796.9    5035.6    5612.0    5765.5 
Transportation/ 
Communication     242.0     278.0     329.4     340.4 
Other            3847.7    4337.3    4553.5    8158.2 
 
T O T A L       19617.5   26118.6   27439.2   31707.6 
 
 
 
Table 6b: Italian Investment in the U.S. by Economic Sector -- 
End-Year 2005-2008 (Percentage of Total) 
 
                   2005      2006      2007      2008 
 
Agriculture         0.3       0.3       0.3       0.2 
 
Energy              9.6       7.9       7.6       6.5 
 
ROME 00000082  015.2 OF 016 
 
 
 
Industry           38.7      50.1      49.2      44.1 
 of which: 
Machine            14.5      30.3      29.2      25.6 
Transportation 
Equipment           4.9       3.8       3.8       3.4 
Chemical            1.1       1.3       1.5       1.9 
Food                1.5       1.2       1.2       1.0 
Textiles            4.2       3.3       3.2       2.8 
Minerals/ 
Metals              8.3       6.6       6.8       6.2 
Other               4.2       3.6       3.5       3.2 
 
 
Services           51.4      41.7      42.9      49.2 
 of which: 
Trade               6.1       4.8       4.7       4.2 
Banking/ 
Insurance          24.5      19.3      20.4      18.2 
Transportation/ 
Communication       1.2       1.1       1.2       1.1 
Other              19.6      16.5      16.6      25.7 
 
T O T A L         100.0     100.0     100.0     100.0 
 
 
Table 7: Direct Investment by Origin and Destination End-Year 2008 
(USD Millions) (4) 
 
               Foreign         Italian         Net 
               Investment      Investment     Italian 
               in Italy        Abroad        Position 
 
EU              323706.2       410885.6        87179.4 
 of which: 
  United Kingdom 35377.1        20378.5       -14998.6 
  Netherlands    81324.9       123124.3        41799.4 
  Germany        10962.1        21211.9        11194.7 
  France         45204.8        34128.5       -11076.3 
  Spain          18059.3        50532.5        32473.2 
  Luxembourg     34642.7        25865.8        -8776.8 
  Belgium         6789.5        11118.6         4329.1 
  Sweden          4012.7          901.1        -3111.6 
  Other (3)      16901.1        21779.7         4878.5 
 
Non-EU           71331.9       101844.6        30512.7 
 of which: 
 USA             31707.6        25974.6        -5733.1 
 Switzerland     25435.0        13531.1       -11904.0 
 Liechtenstein    2638.4          214.7        -2423.7 
 Japan            4187.9         1685.2        -2529.7 
 Canada           1083.3         1504.2          420.9 
 Argentina         320.6         2162.4         1841.8 
 Brazil            577.7         5611.6         5033.9 
 Other            5382.5        51187.9        45806.5 
 
T O T A L       323706.2       410885.6        87179.4 
 
 
(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: 
 
                   2005      2006      2007      2008 
 
Euro/Dollar       0.805     0.796     0.744     0.708 
 
 
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: 
 
                   2005      2006      2007      2008 
 
Euro/Dollar       0.847     0.759     0.744     0.684 
 
(3) Austria, Denmark, Finland, Portugal, Greece, Ireland (other EU 
25 countries), plus Cyprus, Czech Republic, Estonia, Hungary, 
Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia (plus Bulgaria 
 
ROME 00000082  016.2 OF 016 
 
 
and Romania only for 2007). 
 
(4) Original data in euro and converted at the end-2008 
exchange rate of one dollar = 0.708 euro. 
 
Sources:  Bank Of Italy Annual Report 2008 
http://www.bancaditalia.it/pubblicazioni- /relann/rel08/rel08it 
 
 
THORNE