“Italy and the Investments that do not Come”, op-ed by Ambassador Ronald P. Spogli, April 19, 2007

Ambassador Ronald P. Spogli
the following op-ed appeared in Italian on the "Corriere della Sera" daily on April 19, 2007

The decision of AT&T, one of the largest American companies and world leader in the telecommunications sector, to withdraw its proposal to invest in Italy, has provoked many comments and much discussion. Italy has lost the interest of a business of the highest level, capable of improving telecommunication services, reducing costs for Italian users, and increasing the value of a national company.

At the same time, what happened has been useful to attract attention to the possible role of foreign investors in Italian economic growth. The Telecom Italia-AT&T episode allows for a broader analysis.

For over a year I have been promoting an initiative of the U.S. Mission in Italy called Partnership for Growth. The goal is that of stimulating the full potential of the Italian economy, which often is not fully exploited.

The initiative is focused above all on entrepreneurship and innovation as driving forces for growth. Among the various activities, we have analyzed with various Italian interlocutors the need to broaden capital markets and to promote financial tools that can help entrepreneurs to create new businesses, and grow and make more competitive existing ones.

Entrepreneurship is just an idea if it has no access to capital – which is another word for investment. Yet investment in companies, both new and established, lags in Italy. Money goes into real estate, or a house for one’s children, rather than into a new company with a promising idea. Moreover, Italy often throws up barriers to foreign firms willing to invest in Italy. Whether it is investment in infrastructure (e.g., the autostrada or a telecommunications company), financial services (e.g., a major bank), or transportation (e.g., an airline), one of the first reactions one hears to the sound of interest from a foreign company is that Italian national interests must prevail. What is the result of this less than open approach to foreign capital? A quick comparison to Italy’s European competitors is instructive. According to the United Nations Conference on Trade and Development (UNCTAD) in 2005, Italy attracted about $20 billion in new foreign investment. France came in with more than $60 billion. The United Kingdom was the global leader with $165 billion.

As American Ambassador I focus most of all on my country’s investments. Here too, the situation is not comforting. Up to 2005 the cumulative total of U.S. investment in Italy amounted to slightly less than $26 billion, well below the U.K. at $324 billion, Germany at $86 billion, France at $61 billion and even Spain at $43 billion.

These numbers should provoke reflection. Investments do not come where they are not well received, and where the rules of the market are continually changed. Modifying the rules raises the level of risk, and makes it very difficult to program the future activities of a company, or a single citizen. I do not know the details of the Telecom negotiations, but the renunciation letter of AT&T clearly expresses reluctance to invest in a market where the rules are unpredictable. I think it is an understandable reluctance, that a majority of Italians would share. It is necessary to focus less on who would like to invest in Italy and more on the fact that Italy ranks at the bottom of European countries in terms of GDP growth, wage growth, and productivity growth. There is a connection between all those lagging positions and the low level of investment. To assure the right priority for growth and productivity, it is necessary to evaluate carefully proposed investments. Will the enterprise receive greater funds and become more competitive? Would the change add value? Will services improve? Will consumers, in Rome, Milan or Lecce, benefit? These are the questions to ask, remembering always that all that simulates foreign investment has a positive impact also on internal investments.

For this reason, there is the need for a more positive vision. Italy must grow and successfully compete in the global marketplace in order to sustain its social model and provide new opportunities for its young people. A more welcoming attitude toward investment would doubtless help achieve these important goals.