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Newsletter n. 18

Foreign investors reward Italy’s reform effort

The AT Kearney Foreign Direct Investment (FDI) Confidence index 2018 ranks Italy among its top ten investment destinations. The country has moved up three positions since last year’s ranking, a few years ago it was not even included in the Index.

Foreign investment, in its broadest definition, has indeed picked up in Italy: multinational corporations have in- vested in green/brownfield projects (Audi in Modena, GE in Turin, Hitachi in Tuscany/ Southern Italy, Novartis near Naples); insti- tutional funds have flowed back into Italian equity and fixed income markets; alterna- tive funds are scaling up business in Italy.

On the real estate front, 2017 was a record year. Total investments in commercial real estate exceeded € 11.3 billion, up 18% compared to 2016, with foreign investors achieving more than 50% of transactions. And although the first quarter of 2018 slowed compared to the same period last year, the volume of investments (€ 1.5 billion) is higher than the 5 and 10 year average of the first quarters of the year.

This did not happen by chance. Starting from “Destinazione Italia”, a com- prehensive plan adopted in 2013 to attract foreign investment, Italian Governments have worked hard to improve the coun- try’s business environment. A better business environment attracts foreign in- vestors and is a boost for Italian compa- nies: what is good for international inves- tors is good for Italian entrepreneurs.

The effort has been part of a structural reform programme which led to a labour market overhaul, a reform of the banking sector, modernisation of the tax adminis- tration system and other key initiatives. All these measures have been implement- ed as part of a fiscal policy framework that is in line with European rules and Italy’s EU commitments and has en- abled the Government to reduce taxa- tion, especially corporate taxes, such as the labour tax wedge and the corporate tax rate that passed from 27.5 to 24 per cent. Today the effective tax rate for Italian businesses is well below the Eu- ropean average.

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