Italy's national territory covers a total of 301,333 square kilometres, characterised by a predominance of high altitude areas with 39.7% hilly terrain and 38.7% mountainous, while only 21.6% is plains land.
According to the latest census conducted in 2001, Italy has a population of 56.3 million, 27 million of whom are men and 29 million women. The number of foreigners living in Italy has almost tripled since 1991 (from 356,159 to 987,363). For every 1,000 inhabitants, an average of 17.5 are foreign citizens.
Italy's birth rate is among the lowest in the European Union, and immigration has contributed to a positive demographic trend in Italy, taking the natural growth rate from -0.3 to +2.3 people per 1,000 inhabitants in 2002.
Italy's economic structure is similar to most other European countries. The services sector accounts for two-thirds (69%) of the GDP, its strong points being trade and tourism. A full 29% of national income comes from industry and the remaining 2% from agriculture. The strongest industrial sectors are machinery, clothing and textiles, the former exporting over EUR 52 billion in machinery,equal to approximately 25% of total Italian exports; in the sector of clothing and textiles, exports surpass EUR 25 billion (approx. 10% of Italian exports).
Peculiar to the Italian productive system are its "industrial districts", a high concentration of small and medium-sized, generally artisan, businesses specialised in the manufacture of a specific item and grouped together in the same territorial area. Within the same district, companies establish close relationships which contribute to the creation of the competitive success typical of this production method: on the one hand strong competition stimulates product innovation; on the other hand, proximity and a high level of specialisation allow for a continuous transmission of knowledge. This makes not only for a high level of flexibility, but also enables the economies of scale typically found in large companies to be achieved through productive integration.
Thanks to this model, Italy is one of the countries where entrepreneurial initiative has seen the most extensive development, and entrepreneurial autonomy has allowed creativity and the pursuit of beautiful and tasteful finished products to flourish, making the "Made in Italy" label famous the world over.
When the label says "Made in Italy" it means elegant apparel and sophisticated design - but that's not all. From Italian cuisine to the most advanced technological solutions in machinery and robotics, there are many fields in which Italy has gone to the head of the class. Food and agriculture, machinery, textiles and apparel are the fields that have had the most significant impact in terms of turnover, employment and number of firms. The agri-alimentary industry (agriculture, industy, distribution and services), is worth approximately 180 billion euro of gross saleable production while agricultural production alone generates approximately 408 billion.
Wine-producing is the strong point of the Italian agri-alimentary sector, with Germany, the USA, England and Canada topping the list of Italian wine importers , representing a turnover of approximately 8.5 billion euro.
The transport sector has strategic importance in terms of exports. Italy occupies fifth place in the production of automobiles and parts, following the USA, Japan, France and Germany. It is a world leader in the production of pleasure-boats, 80% of which are destined for foreign markets. Finally, Italy is first in Europe in the production of motorcycles, with exports accounting for 50% of sales. An important contribution to the positive image of Italian industry is owing to our illustrious designers, famous throughout Europe and the world.
Italian industrial design embraces various sectors. Furniture and furnishings make up the main sector (in which Italy is the world leader). With over 35,000 companies and approximately 230,000 operatives, Italy is the second largest producer of furniture in the world after the United States and the absolute leader in exports. A good 45% of total production is exported (8 billion euro) and Italy's furniture exporting activities account for 17% of the world market.
Other divisions in which Italy plays a leading role are lighting design, boat and car design, where signatures like Pininfarina and Giugiaro have brought fame to many FIAT and foreign model cars, not to mention the Eurostar and Pendolino trains.
At the upper end of machinery production are tools for the textile, metallurgic, chemical, appliances and food processing industries. As far as food processing is concerned there are coffee machines, machines for producing pasta, bread, pastries and preserves just to name a few. The production of machinery used in building engines also stands out, as well as for heating system valves and plumbing taps, for which Italy is second only to Germany. Companies that manufacture machines for metal working are also important, a sector in which Italy occupies third place worldwide.
The strong point of the machinery industry, which represents approximately 40% of the manufacturing industry, is the presence of numerous small and medium sized companies throughout the national territory. Turnover in 2004 amounted to approximately over 34 billion euro. Another important statistic to point out has to do with exports, which amounted to 52.2 billion euro with a sector trade surplus of almost 33 billion euro.
The "fashion system" is made up of all those sectors that produce goods designed for ¡°dressing people¡±. Thus in addition to producers of textiles and clothes, other types of businesses associated with the production of accessories are involved, such as manufacturers of leather goods (accessories and footwear), eyewear, jewellery and cosmetics. The system represents over 6% of Italy's entire GDP and 18% of exports.
Foreign businesses find favourable conditions for investing in Italy: a broad-based market, synergy among industrial districts, a competitive logistic structure, targeted training, major incentives, capital investments, and above all, industrial ideas and planning.
Furthermore, the strong correlation between the demand for transport and GDP growth has led to the drawing up of a strategic infrastructure-boosting plan agreed to by all of the regions. The latest European Union reports confirm Italy's reliability not only as the land of choice for businesses, especially for small and medium ones but also, and above all, as a country where entrepreneurs are best situated for business development and where a propensity for development exists and, therefore, where there is a very high inducement to invest - three times higher than that of Germany and Austria.
The Italian incentive system offers a wide array of opportunities and possibilities: from financing for the purchase of machinery and equipment to regulations facilitating the start-up of new businesses, with special provisions for enterprises run by women. Furthermore, the law keeps track of trends and developments in the economy and in society in general. Thus a series of instruments, the existence of which was unimaginable only a few years ago, allow for technological investments or interventions for environmental protection or innovation. These are aimed at the development of computerised communication and marketing systems, thus providing financing for e-commerce, or of laws that facilitate an increase in employment levels or that open the way to the internationalisation of enterprises.
The regulation of incentives, regardless of their form and nature, is currently based on community regulations regarding government assistance to companies. The available incentives originate in regional laws, national laws or European Community planning (structural funds, EU programs and so on, made available to member countries).
As regards size, businesses are divided into large, small and medium-sized enterprises, (SMEs) and micro enterprises.Beginning on 1 January 2005, the definition of SMEs, which are the main recipients of the funds disbursed in the form of incentives, meets the criteria contained in Recommendation 2003/361/EC, adopted by the European Commission on 6 May 2003, which introduced a new category of micro enterprise. Small and medium-sized and micro enterprises meet the following criteria:
* a maximum of 10 employees for micro companies, 50 employees for small companies, and 250 for medium-sized ones;
* maximum turnover not exceeding 2 million euro for micro businesses, 10 million euro for small and 50 million euro for medium-sized companies;
* control of corporate capital: the company may not be more than one quarter (25%) controlled by companies or groups not falling within the category of small to medium-sized company.
As regards location, it is necessary to distinguish between incentives applicable to the entire national territory and those applicable to particular areas which, based on specific economic criteria, are at a significant disadvantage from an economic point of view. In these so-called "depressed" areas, greater incentives are available when making certain types of investments. The areas in question are the following:
* Objective 1 areas (Title 1, Heading I, Article 3, EC Regulation 1260/99): Regions in which GDP per capita, based on data of the last three years, is less than 75% of the Community average. In Italy these regions are: Campania, Apuglia, Basilicata, Calabria, Sicily, Sardinia and Molise - the latter is only entitled to receive temporary support (see below).
* Objective 2 areas (Title 1, Heading I, Article 4, EC Regulation 1260/99): areas in industrial decline in which the unemployment rate is greater than the average rate of the Community in the last three years, as well as rural areas with a low level of socio-economic development. In this case, the areas concerned are towns or even parts of towns.
* Temporary support system (Title 1, Heading I, Article 6, EC Regulation 1260/99): also defined as phasing out, this is temporary financial support for areas included in a priority Objective area, either 1 or 2, but which no longer fulfil the criteria for that type of objective. The aim of this is to allow regions and areas no longer eligible for funds to exit in the system gradually.
* Article 87.3 c: added to depressed areas are also those towns that can take advantage of further concessions as they benefit from a special exception set forth in article 87.3.c of the consolidated version of the Treaty establishing the European Community.
The interventions and incentives in favour of enterprises are grouped into two main categories: financial incentives and tax relief.
There are two main types of financial incentive:
* capital contributions calculated as a percentage of allowable expenses; since this is a grant, it does not require repayment of capital or of interest.
* interest subsidies, aimed at reducing the interest rate applied to financing provided to the company and normally based on a medium to long-term time frame.
Tax relief is considered to be indirect, as it does not take the form of direct contribution but of exemptions or reductions in the tax burden. This reduction may occur in two ways:
* direct reduction of the taxable base
* credit or tax bonus that can be used to offset taxes.