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Italy loses billions in foreign direct investment, Central bank says

by Carmine Fotina

Italy has lost nearly €16 billion worth of foreign direct investment in the last seven years because its institutions are not as efficient as those elsewhere in Europe, according to a study by the country’s central bank.

Its institutions – from the judiciary to the public administration – are not as conducive to attracting investors as those of other countries, according to the study, entitled “Foreign Direct Investment and the Quality of Institutions”.

Italy’s difficulty in attracting foreign investors has become such a problem that recent governments have made it one of their mandates to make the country more business friendly.

Former Prime Minister Enrico Letta came out with his “Destinazione Italia” (Destination Italy) initiative, while his successor, Matteo Renzi, has had his “Decreto Competitività” (Competitiveness decree), a series of norms designed to make the country more attractive.

These norms have yet to come into effect, however.

Meanwhile, Italy keeps missing opportunities to attract foreign investors.

According to the study, if its institutions were of the same of quality as those in countries elsewhere in the euro zone, Italy would have received 15% more foreign direct investment between 2006 and 2012 for a total of nearly €16 billion.

The quality of its legal and financial institutions are decisive, it says, explaining how the efficiency of justice and bureaucracy are as important as capital, labor and technology.

The study used the same parameters set for the indicators in the “Doing Business” survey of the World Bank and tracked the life cycle of a small- to medium-sized business.

The composite index created from these parameters shows how Italy fairs poorly among the 130 countries (40 "developed" and 90 "developing") surveyed.


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