2020 was a year to forget for the world economy. Despite the effects of the pandemic, which have caused (and are still causing) a situation of general recession, there are also positive effects.
Interesting indications emerge from the EY Attractiveness Survey 2021, the annual study that analyses investment trends in Europe in relation to the perceptions of international players, with the aim of investigating the level of attractiveness of each country.
The study, published at the end of June, shows an increased interest of international investors in the 'Italian system'. Specifically, the positive data that most directly concerns us is that relating to the five percentage points more than in 2019 in the number of foreign direct investment projects in our country. This is a positive figure, especially if compared to the fact that almost half of those interviewed, managers of internationally active companies, say they are ready to expand their activities in our country.
Italy is doing better than other countries for foreign investment
Despite the hard blow inflicted by Covid-19, Italy is among the few countries in the Old Continent to have recorded a growth in the number of foreign investments compared to 2019. Compared to an average drop of 13%, direct investment in Italy has grown by 5%, with a total of 113 new projects financed in 2020. This is an encouraging figure, signalling renewed interest in our country, even if the share of FDI (foreign direct investment) destined for Italy compared to the European total remains low (2% of the total, compared to 18% in France and 17% in Germany and the United Kingdom).
The United States (24%) leads the ranking of foreign direct investment in Italy in 2020, followed by France (16%), Germany (12%) and the UK (9%). The Chinese powerhouse (4%), on the other hand, lags behind Japan (3%) by a few points.
In which sectors are investments concentrated?
Attracting the largest slice of foreign investment in Italy in 2020 are the business services sector, so-called B2B (13%), and the software design and IT services sector (12%) - although the latter suffers a drop of 5 points compared to 2019. Also growing in the year of the pandemic are the logistics and wholesale (12%), finance (8%) and pharmaceuticals (7%) sectors. The machinery and industrial equipment sector (5%) and the textile sector (4%) saw the steepest declines in 2020, driven by the climate of uncertainty during the lockdown months.
Of the total of 113 new projects directly financed by foreign investors in 2020, 22% were in the sales and marketing area. Also, worth noting is the growth of projects aimed at enhancing our technical and entrepreneurial know-how, with higher added value, such as investment in manufacturing processes (19% of projects) and in research and development (15%).
Still a long way to go...
The study shows that FDI does not follow a homogeneous distribution over the national territory, being concentrated in regions characterised by the presence of the most innovative industrial districts (e.g. mechatronics, luxury and design, furniture, textiles, biomedical), especially in the North-West (58% of FDI) and Central Italy (24%). On the other hand, the focus has been on territories characterised by more interconnected physical and digital infrastructures and densely populated areas, where logistics platforms have been developed to serve omnichannel services.
Despite the positive signals from many sectors of the economy, there are still some critical issues to be addressed in order to increase the country's attractiveness. First and foremost, partial regulatory uncertainty was cited as the most pressing issue by 58% of respondents. Excessive bureaucracy for business (55%) was also mentioned as strategic.
Cutting taxes (29%), supporting small and medium-sized enterprises (28%) and reducing labour costs (28%) are the three macro-areas of intervention that, according to the managers interviewed, would make it possible to give a decisive boost to Italian competitiveness. Restricting the field of analysis to investors who have already established activities in Italy, the priorities to be addressed include the strengthening of environmental sustainability policies and green transition (35%), compared to labour costs and tax reduction, which are not among the top objectives of the country's political and economic agenda.
Since a significant portion of new investment flows points to Italy for its technical know-how and the quality of its human capital, it is necessary to work on these aspects in order to enhance Italy's excellence also in areas with greater added value, such as research and development, manufacturing processes and related quality controls.
Existing infrastructures need investment in order to gain competitiveness and resolve the lack of homogeneity between the various areas of the country. Strengthening domestic demand is another lever that can be activated to attract more investment in the future, with a consequent impact on employment and growth.
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