What makes Italy attractive?

Transcription

1 What makes Italy attractive? March 2013 Italian Ministry of Economy and Finance, Treasury Department

2 OVERVIEW Italy s strengths Key international player Wide range of opportunities Numerous reforms undertaken Solid stock market Sound private sector balance sheet Increasingly flexible labour market Strong manufacturing sector Export-oriented industry Strategic position Dynamic small and medium enterprises Entrepreneurship and high skills 2

3 KEY INTERNATIONAL PLAYER Italy in the global context G8 member and the third largest economy in Euro Area. One of the founders of the European Union. An active player in the international scene. A hinge-country between Europe and the Mediterranean and Middle East regions. 3

4 STRONG MANUFACTURING SECTOR A strong manufacturing culture Agriculture & Fishing Manufacturing Services Weight of the Area North West 1.7% 29.0% 69.3% 31.9% North East 2.9% 30.8% 66.3% 22.9% Center 1.8% 20.2% 78.0% 22.2% South & Islands 4.2% 18.6% 77.2% 23.0% Source: ISTAT 4

5 STRONG MANUFACTURING SECTOR The 2nd largest manufacturing sector per capita Per capita industrial production (current US$) Germany Italy Japan USA New EU countries Russia World Brazil China India Source: Centro Studi Confindustria on national sources and Global Insight 5

6 STRONG MANUFACTURING SECTOR Industry switching to mid-tech specialisation The evolution of Italian manufacturing structure (sales at constant prices) High tech Machinery & electrical equipment Transport Intermediate goods Household goods Fashion goods Other consumption goods Source: Intesa Sanpaolo Prometeia

7 STRONG MANUFACTURING SECTOR Technology clusters boost firms performance 138 districts. Topography (2010): firms with 1.5mn workers 74,6 bn in export Districts account for 1/3 of the whole manufacturing system 27 districts specialising in high-tech sectors: aerospace, biotech, ICT, pharmaceuticals. Source: Intesa Sanpaolo, Monitor dei distretti Technological clusters Traditional districts 7

8 EXPORT-ORIENTED INDUSTRY Export excellence and leadership Italy 2010 World Export Ranking Number of Products Value in USD billion First Second Third Note: The ranking is within the world manufacturing. Source: Fortis-Corradini Index, Un Comtrade, ISTAT, Fondazione Edison Analysis 8

9 China Germany US Japan South Korea Netherlands France Italy Belgium UK % EXPORT-ORIENTED INDUSTRY Italy s export market shares are resilient , ,2 8,6 6 5,1 4 3,4 3,6 3,6 3,3 3,0 2,8 2 0 Source: Calculation on UN-Comtrade data 9

10 EXPORT ORIENTED INDUSTRY Italy: 56% of export within Europe Italy is an export-led economy; European countries are the leading trading partners. Italy s imports are sizeable due to the lack of oil, gas and raw materials. Leading trading partners Germany 12.8% 12.7% 13.0% 13.1% France 11.2% 11.6% 11.6% 11.6% USA 6.2% 5.9% 6.0% 6.1% Spain 6.5% 6.5% 5.7% 5.3% Switzerland 3.9% 4.6% 4.7% 5.5% UK 5.2% 5.2% 5.2% 4.7% China 1.7% 2.3% 2.6% 2.7% Turkey 2.0% 1.9% 2.4% 2.6% Source: Ministry of Economic Development, ISTAT 10

11 % change in export share on Italy GDP EXPORT-ORIENTED INDUSTRY Redirection of exports to more dynamic countries Italy ranks first among world exporters of clothing, textiles and leather products and second in non-electronic machinery, basic manufactures and miscellaneous manufacturing. (Source: UNCTAD/WTO, Trade Performance Index 2010) Export and economic growth in main countries, % real GDP growth Regression line (correlation coefficient = 0.50) Source: Calculation on ISTAT and World Bank data. Note: Export share are calculated as a ratio on Italy s nominal GDP, for 27 countries and a minimum export share by 1%. 11

12 STRATEGIC POSITION Openness to trade Around 6,500 km of motorways and km of national roads; one of the most developed freight village systems in Europe. Links to European key connection systems. International ports, logistics platforms and interports 263 ports scattered along km of coastline. Port traffic of 475mn tons. Second most important country in Europe for maritime freight transport: 3 ports are classified in the Top 20 of European container ports in 2011: Gioia Tauro, Genoa and La Spezia. First EU country in maritime transport of passengers with 92mn passengers. Source: INVITALIA 12

13 DYNAMIC SMALL AND MEDIUM ENTERPRISES Small is beautiful but 3,900 businesses with total revenues ranging from 15mn to 330mn. 400 businesses with total revenues ranging from 331mn to 3bn. Higher revenue growth with exports equal to 40-50% of total revenues. Good profitability and solid balance sheets. Account for about 50% of total Italian manufacturing value added. Large Italian companies account for only 8.4% of total manufacturing value added and the subsidiaries of foreign companies for 13%. Source: Exagon, Mediobanca IV Capitalism, Area Studi Mediobanca and Centro Studi Unioncamere 13

14 DYNAMIC SMALL AND MEDIUM ENTERPRISES Italian companies need scale to compete Firm size in manufacturing All companies Companies with at least 10 employees Companies with at least 250 employees Number of firms Average firm size % share of firms Average firm size % share of firms Average firm size Italy 426, France 212, Germany 209, Spain 188, Source: Eurostat, Structural Business Statistics 14

15 DYNAMIC SMALL AND MEDIUM ENTERPRISES Italian firms: 392 M&A transactions in the 1st half of 2012 Source: Lincoln International 15

16 ENTERPRENEURSHIP AND HIGH SKILLS The favorable multiples of the Italian market Multiples used in private equity transactions depend on many variables: in Italy multiples are lower than in Europe or in USA Turnaround still a niche: there are a slate of SMEs experiencing financial stress that are attractive turnaround opportunities. Source: Why Not Italy?, Simmons & Simmons, Roland Berger, Bain Cuneo, Credit Suisse, Private Equity Monitor Source: AIFI 16

17 ENTREPRENEURSHIP AND HIGH SKILLS Entrepreneurial culture and high labour skill The Italian production network is based on strong entrepreneurial culture, high quality products in several economic sectors and export-oriented attitude. Italy ranks 2nd in Europe in terms of manufacturing companies with a skilled workforce, which in turn contributes to the high quality of Made-in-Italy products. High skills gained with on-the-job training and closely related to traditional craftsmanship, not well captured by international statistics. 17

18 INCREASINGLY FLEXIBLE LABOUR MARKET Labour market is less rigid than commonly believed Doing business sub-indices for some Euro area countries Ireland Italy Netherlands France Spain Germany Rank Difficulty of hiring (0-100) Rigidity of hours index (0-100) Difficulty of firing index (0-100) Rigidity of employment index (0-100) Firing cost (weeks of salary) Note: Higher values for the indices correspond to more labor market rigidity in the country considered. Source: Doing Business database, World Bank 18

19 INCREASINGLY FLEXIBLE LABOUR MARKET The recent reform has increased labour market flexibility The recent labour market reform enhanced entry and exit flexibility for apprenticeship and fixed-term contracts. Apprenticeship is the preferential channel for young people (up to 29 years old) to enter the labour market. Hiring apprentices: employers benefit from fiscal incentives for a 3-year period. 19

20 INCREASINGLY FLEXIBLE LABOUR MARKET National agreement to help boosting labour productivity Agreement between trade unions and employers associations to help boosting labour productivity by providing for labour contracts that better reflect the needs of individual companies. A special fund is designed to cover the reduction of taxes on productivity-linked wage increases set at local level. A pact between generations is introduced, allowing for senior workers to stay at work longer by smoothing retirement transition and increasing employment of young workers. 20

21 SOUND PRIVATE SECTOR BALANCE SHEET Financial stability is not at risk Net wealth of households is 8 times their disposable income (8.2 UK, 8.1 FR, 7.8 JP, and 5.3 US). Italian households are less leveraged: 71% of disposable income (100% FR & GE, 125% US & JP, and 165% UK). Q Breakdown of Total Debt (% of GDP) Source: Bank of Italy, Anno XXII, December 13, 2012 Bulletin based on 2010 data. Source: Simmons & Simmons, McKinsey Global Institute 21

22 SK SL IT FR BE DE AT EE EA-17 FI ES PT LU IE NL LT CZ PO HU LV UK SW DE SK EE DE EL NL IT AT EA-17 FI SL ES IE FR CY BE PT MT LU LT PL RO CZ LV BG HU DK UK SW % of Disposable income % of Gross operating surplus 300 SOUND PRIVATE SECTOR BALANCE SHEET Debt-to-income ratio about the lowest Households 1600 Non financial corporations euro area non-euro area Source: Eurostat, 2011 data. Note: Data for LU and PO refer to 2009 and 2010 respectively. Gross debt-toincome ratio of households is defined as loans (AF4), liabilities divided by gross disposable income (B6G) with the latter being adjusted for the change in the net equity of households in pension funds reserves (D8net). Non-consolidated figures. euro area non-euro area Source: Eurostat., 2011 data Note: Data for LU refer to 2009, while for BG, MT and PO data are available for Debt includes loans and securities other than shares. Non-consolidated figures. 22

23 Percentage of GDP SOUND PRIVATE SECTOR BALANCE SHEET Private debt remains low Non financial corporation Households AT BE DK FI FR DE EL IE IT NL PT UK ES SW Source:Our calculations on Eurostat data 23

24 SOUND PRIVATE SECTOR BALANCE SHEET Italian households wealth and its components Euro million Net Wealth Financial Assets (37.2% in 2011) Houses Real Estate (62.8 % in 2011) Financial Liabilities (9.5% in 2011) Source: Bank of Italy, Anno XXII, December 13, 2012 Bullettin 24

25 Indices 2000=100 SOLID STOCK MARKET FTSE MIB: Corporate Italy Italy s stock exchange is part of the London Stock Exchange Group. 328 listed companies, 752 listed ETP fixed income listed securities. N. 1 in Europe both for turnover velocity and fixed income trades & turnover Stock market capitalisation to GDP Italy France UK Spain Europe Germany Source: World Bank 25

26 SOLID STOCK MARKET FTSE MIB: Corporate Italy Top 10 by Capitalization ( ) Euro billion Capital Rev. Net Income 1 ENI Oil & Gas 2 Enel Electric Utilities 3 Unicredit Regional Banks 4 Generali Insurance (Life) 5 Intesa San Paolo Regional Banks 6 Tenaris Constr. Supplies & Fixtures 7 Luxottica Medical equipment & Supplies 8 Saipem Oil Well Services & Equipment 9 Telecom Italia Communications services 10 Snam Natural gas utilities Source: Borsa Italiana 26

27 STRONG REFORM MOMENTUM Structural reforms for a sound business environment Public administration: (1) access to all services on line; (2) certified electronic mailing for communications; (3) reduced administrative burden especially for networks of companies. Support to businesses: (1) Aid for Economic Growth (ACE) to reduce the tax burden on capital investment; (2) Central Guarantee Fund to refinance financial transactions for SMEs. Cohesion Action Plan: (1) education and professional training; (2) digital agenda; (3) employment; and (4) railways. Making bankruptcy procedure easier and reducing trial length. 27

28 Product Market Regulation - Total Utilities - Total Gas Post Railways Telecom Retail - Total Professions - Total Accountants Architects Engeneering Legal STRONG REFORM MOMENTUM Product market reforms by sectors OECD Product Market Regulation Indicator - Italy PMR Utilities Retail Professions 28

29 STRONG REFORM MOMENTUM A boost to competitiveness Single point of contact (Desk Italia) to speed up the internationalisation of Italian businesses and attract FDI. Agency for Digital Italy to promote the establishment and the development of major strategic projects. More investment in innovation and research: (1) a special fund for SMEs investment in R&D; (2) innovative start-ups to improve innovation and youth employment 29

30 WIDE RANGE OF OPPORTUNITIES New opportunities for companies growing fast Potential market of almost 60mn consumers for innovative services (more than 30mn internet users) and products. Countless opportunities to expand businesses in strategic sectors such as logistics, tourism, renewable energy and energy efficiency, green-tech and bio-tech projects. Plan to boost infrastructure projects ( 40bn funded): highways, high speed trains, intermodal. Financing of new projects. 30

31 % of GDP WIDE RANGE OF OPPORTUNITIES Sizeable reduction in pension spending due to reforms 19% 18% 17% 16% 15% 14% 13% 12% Current Legislation Legislation before DL. 201/2011 Legislation before DL. 98/2011 Legislation before DL. 78/2010 Legislation before L. 243/2004 Source: Update of 2012 Economic and Financial Document, September 20, Demographic projections from Istat, central demographic scenario

32 WIDE RANGE OF OPPORTUNITIES Investment in undersized sectors due to population ageing Investment opportunities both in health services and childcare and long-term care as a result of the ageing process and the recent pension reforms. Recent pension reforms have made the social protection system fully sustainable: large potential for developments in alternative and private pension schemes. 32

33 WIDE RANGE OF OPPORTUNITIES A new season for privatisation and dismissal of public assets Conservative estimates of potential revenues from privatisation of municipally-owned companies (some listed) is about 200bn. Real estate assets will be transferred from central and local government to a real estate fund, which has a mandate to create value and/or dismiss assets. A political commitment to reduce the stock of debt by 1pp of GDP per year with privatisation and dismissals. 33