Saudi Industrial Development Fund Marketing Consultancy Division (MCD)/1 Export Consultancy Unit (ECU) Country Profile Republic of Italy (Up-Date) Safar 1435H (December 2013G) COUNTRY PROFILE- ITALY 1435-2013 Table of Contents 1.INTRODUCTION .................................................................. 4 1.1Italy Flag..................................................................................................................................... 4 1.2 Fact Table ................................................................................................................................. 4 2. POLITICAL & ECONOMICAL ENVIRONMENTS ............................... 6 2.1 Political Structure.................................................................................................................. 6 2.2 Economy ..................................................................................................................................... 6 2.2.1 Economy Performance ....................................................................................................... 6 2.2.2 Balance of Payments ......................................................................................................... 7 2.2.3 Global Benchmarks of Italy(cid:146)s Economy ...................................................................... 7 2.2.4 Important Sectors of the Economy ........................................................................... 8 2.2.5 Energy and Natural Resources ................................................................................... 14 2.2.6 Summary of Italy(cid:146)s Economic Dynamics .................................................................. 14 2.2.7 Economic Growth Outlook ............................................................................................. 15 3.TRADE AGREEMENTS & REGULATIONS ..................................... 16 3.1.1 Italy and the WTO ........................................................................................................... 17 3.1.2 Italy and the European Union ...................................................................................... 17 3.1.3 European Union & Gulf States ..................................................................................... 18 3.1.4 Regional Trade Agreement ........................................................................................... 19 3.2 Taxation ................................................................................................................................... 20 3.2.1 Taxes ..................................................................................................................................... 20 3.3 Imports .................................................................................................................................... 21 3.3.1 Import Requirements & Documentation .................................................................. 21 3.3.2 Imports Tariff .................................................................................................................. 23 3.3.3 Import Duties .................................................................................................................... 23 3.3.4 Customs Duties ................................................................................................................. 24 3.3.5 Excise Duties ..................................................................................................................... 24 3.3.6 Imports Preferential Treatment ............................................................................... 25 3.3.7 Customs Classification ................................................................................................... 25 3.3.8 Countervailing .................................................................................................................... 25 3.3.9 Watch Duty Rate ............................................................................................................. 25 3.3.10 Value-Added Tax (VAT) .............................................................................................. 26 3.3.11 Examination Fees ............................................................................................................ 26 3.4 Imports Procedures & Regulation ................................................................................. 26 3.4.1 Anti-Dumping Measures ................................................................................................. 26 3.4.2 Import Restrictions ........................................................................................................ 26 3.4.3 Import Prohibitions ......................................................................................................... 27 3.4.4 Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) ... 27 3.4.5 Waste Electrical and Electronic Equipment (WEEE) & Restricting the Use of Hazardous Substances (RoHS) .................................................................................................... 28 3.4.6 Foreign-Trade Zones/Free Ports .............................................................................. 29 2 COUNTRY PROFILE- ITALY 1435-2013 3.4.7 Intellectual Property Rights (IPR) Protection ..................................................... 29 3.4.8 Copyright ............................................................................................................................. 30 3.4.9 Trademarks ........................................................................................................................ 30 3.4.10 Conformity Assessment ............................................................................................... 31 3.4.11 Accreditation ................................................................................................................... 31 3.4.12 Competition from State Owned Enterprises ...................................................... 31 3.4.13 Products Entries into Italy ........................................................................................ 32 3.4.14 EORI Scheme .................................................................................................................. 33 3.4.15 Customs Valuation .......................................................................................................... 33 3.5 Labeling & Marking Standards ........................................................................................ 33 3.5.1 Country of Origin Marking ............................................................................................ 33 3.5.2 Marking of Goods ............................................................................................................. 34 3.5.3 Textile products ............................................................................................................... 34 3.5.4 CE Marking .......................................................................................................................... 35 3.5.5 Trade Promotion and Advertising - General Legislation ................................... 36 3.5.7 Technical Barriers to Trade (TBT’s) ....................................................................... 36 4.ITALY TRADE ................................................................... 37 4.1 ITALY HISTORICAL FOREIGN TRADE .................................................................... 37 4.2 ITALY IMPORTS ................................................................................................................. 37 4.2.1 Italy(cid:146)s Major Import Partners .................................................................................... 38 4.2.2 Italy Major Imports by Sector .................................................................................. 38 4.3 ITALY EXPORTS ................................................................................................................. 39 4.3.1 Italy(cid:146)s Major Export Partners ..................................................................................... 40 4.3.2 Italy Major Exports by Sector .................................................................................. 40 4.4 SAUDI TRADE WITH ITALY ........................................................................................ 42 4.4.1 KSA Top Exports to Italy by Sector........................................................................ 43 4.4.2 Italian Top Exports to KSA by Sector ................................................................... 44 5.OPPORTUNITIES FOR KSA EXPORTERS ..................................... 45 5.1 KSA EXPORT OPPORTUNITIES ................................................................................... 46 6.SUCCESSFUL MARKETING ..................................................... 57 Attachment (1): Addresses in Italy ........................................................................................... 62 Attachment (2): Italy(cid:146)s Imports (2011-2012) .......................................................................... 63 Attachment (3): Italy(cid:146)s Exports (2011 - 2012) ........................................................................ 65 Attachment (4): SUMMARY OF KSA PRODUCTS SUB-SECTOR FOR EXPORTS TO ITALY ........ 67 Attachment (5): The Chapters Descriptions of the Harmonized System ................................ 71 (Attachment 6) Sectors & Related Government(cid:146)s Authorities .....................................................71 3 COUNTRY PROFILE- ITALY 1435-2013 SECTION (1) 1. INTRODUCTION This issue of an update country profile (CP) concerning the Republic of Italy is part of a series prepared by the Export Consulting Unit (ECU) aimed at exploring export opportunities for Saudi manufacturers in the surveyed countries. This up-date study aims to highlight the main export opportunities to Italy and its trade barriers. This will categorize the opportunities available for KSA manufacturers for considering sales extension through export. 1.1 Italy Flag The flag of Italy was officially adopted on January 21/1919. The Italian flag, the famous tricolor, is derived from an original design by Napoleon. It consists of three vertical bands of equal width, displaying the national colors of Italy: green, white and red. 1.2 Fact Table Italy is a peninsula extending into the Central Mediterranean Sea and it is located in Southern Europe. Italy have borders with France in the West; Switzerland and Austria from the North; and Slovenia from the East. The country also shares a border with two tiny independent states, San Marino and the Vatican City, both of which are entirely surrounded by Italian territory. Italy has an area of 301,340 square kilometers (116,348 square miles) and a coastline length of 7,600 kilometers (4,722 miles). Italy coastal area have Mediterranean climate while the interior parts of Italy have continental climate. Places located on high altitudes are colder and wetter than the places located along the coast. Italian Statistics office is the National Institute of Statistics (ISTAT). ISTAT that Italy population in 2012 was 60,626,442. Moreover, the Central Intelligence Agency (CIA) World Factbook estimated that Italy population growth rate is 0.34% and its population in 2013 is 61,482,297. 4 COUNTRY PROFILE- ITALY 1435-2013 Furthermore, Italy was ranked 24th in the world in term of the population number in 2013 by the CIA, a drop by two ranks compare to its ranking in 2007. Moreover, ISTAT pointed out that Italy population is increasing by new immigrants and new life birth and in 2013 there was on average 40,269 new immigrants and 40,782 new life birth every month. Furthermore, in 2012 ISTAT estimated that Italy has population density of 201 persons per square kilometer. Italy is subdivided into 20 regions namely: Abruzzo, Basilicata, Calabria, Campania, Emilia-Romagna, Lazio, Liguria, Lombardia, Marche, Molise, Piemonte, Puglia, Toscana, Umbria, Veneto, Friuli-Venezia Giulia, Sardegna, Sicilia, Trentino-Alto Adige, Valle d’Aosta. It is further divided into 109 provinces and 8,101 municipalities. The people in Italy mainly follow Roman Catholicism as their religion. The official language of Italy is Italian. Moreover, there is a minority of the population who speaks German, French, and Slovene. Moreover, the Italian language is a descended from Latin and therefore the Italian language vocabulary is close to Latin. Table 1: Fact Table Location Southern Europe, a peninsula extending into the central Mediterranean Sea Time Difference UTC+1 (6 hours ahead of Washington, DC during Standard Time) Capital & major Cities Rome (Capital), Milan, Naples, Turin, Palermo Population 60,626,442 (2012), 61,482,297 (July 2013 est.) Population Growth 0.34% (2013 est.) Christian (79.5%) (Majority Roman Catholic and small groups of Jehovah witnesses Religions and Protestants), Atheist and Agnosticism (19.5%) and 1% Muslims. Major Languages Italian (official), German, French, Slovene Tourism, machinery, iron and steel, chemicals, food processing, textiles, motor Industries vehicles, clothing, footwear, and ceramics. Industrial Production Growth Rate -4.30% (2012) Budget Revenues: $972.5 billion; Expenditures: $1.034 trillion (2012) GDP $1,567 billion (2012) GDP (cid:150) Per Capita $ 25,700 (2012) GDP (cid:150) Real Growth Rate -2.50% (2012) GDP - Composition by Sector Agriculture: 2%; Industry: 29%; Services: 69% (2012) Engineering Products, Chemicals, Transport Equipment, Energy Products, Minerals Imports Commodities and Nonferrous Metals, Textiles and Clothing, Food, Beverages, and Tobacco. Germany 12.8%, France 11.3%, US 6.6%, Switzerland 5.8%, UK 5%, Spain 4.8% Imports (cid:150) Main Partners: (2012) National Currency Euros Euros (EUR) per US dollar -0.7778 (2012), 0.7185 (2011), 0.755 (2010), 0.7198 Exchange Rate (2009), 0.6827 (2008) Source: Adapted from the CIA World Factbook 5 COUNTRY PROFILE- ITALY 1435-2013 SECTION (2) 2. POLITICAL & ECONOMICAL ENVIRONMENTS 2.1 Political Structure Italy is Republic state based on parliamentary democracy. The president is the Chief of the state and is elected by an electoral college consisting of both houses of parliament and regional representatives to serve a seven- year term. The Prime Minister is the head of the government which have the responsibility of enforcing the law in the country and running the day-to-day affairs. The Prime Minister is appointed by the President and confirmed by the parliament on the basis of the majority support in the parliament to serve a five-year term. The legislation in Italy is bicameral. The parliament consists of 2 chambers: Senate (the upper house) consisting of 315 members and the Chamber of Deputies (the lower house) consisting of 630 members. 2.2 Economy Italy is the ninth largest economy in the world, after the United States, China, Japan, Germany, France, UK, Brazil and Russia (World Bank, 2013). Moreover, Italy is a member of the Group of Eight (G-8) industrialized nations and it is a member of the European Union (EU) and the Organization for Economic Cooperation and Development (OECD). 2.2.1 Economy Performance As it can be seen in the below table that Italy economy is in a recession. Italy GDP in 2012 at current prices decreased by 0.5% from Euros 1,580 billion in 2011 to Euros 1,567 billion in 2012. Moreover, Italy GDP in 2012 at constant prices reduced by 2.4% from Euros 1,423.7 billion to 1,389.9 billion. Table 2: Main Economic Indicators Indicators 2011 2012 GDP constant prices (Euros billion) 1,423.7 1,389.9 GDP (constant prices, annual % change) 0.38% -2.4% GDP per capita constant prices (Euros) 23,482.7 22,853.2 GDP current prices (Euros billion) 1,578.5 1,565.9 GDP per capita current prices (Euros) 26,036.5 25,746.4 Inflation rate (consumer prices, annual % change) 2.9% 3.3% Unemployment Rate (%) 8.4% 10.7% Source: IMF - World Economic Outlook Database. 6 COUNTRY PROFILE- ITALY 1435-2013 2.2.2 Balance of Payments Table 3: Italy Balance of Payments Balance of Payments (billions of euros) 2008 2009 2010 2011 2012 Current account -44.9 -30.2 -54.5 -48.3 -8.4 Goods -2.1 0.8 -20.9 -17.4 17.8 Services -8.6 -8.4 -9.2 -5.7 -0.7 Income -19.4 -10.4 -8.3 -9.4 -10.1 Transfers -14.8 -12.2 -16.1 -15.8 -15.5 of which: EU institutions -9.9 -7.0 -10.1 -10.4 n/a Capital account -0.2 -0.1 -0.6 0.6 3.8 Intangible assets -1.0 -0.6 -0.7 -0.4 1.7 Transfers 0.9 0.5 0.2 1.1 2.1 of which: EU institutions 2.2 1.6 1.5 2.7 3.2 Financial account 31.4 37.3 86.7 72.8 7.7 Outward -45.7 -15.3 -24.7 -38.6 -23.2 Inward -7.4 14.5 6.9 24.7 12.5 Portfolio Investment 75.2 28.1 38.5 -34.4 29.2 Equities 61.9 2.6 -37.9 8.9 0.8 Debit Securities 13.3 25.5 76.4 -43.3 28.4 Financial derivatives 1.9 4.3 -4.7 7.5 -0.4 Other Investment 13.0 5.7 71.8 114.5 -9.0 of which banks -18.5 -2.4 8.3 -73.2 -58.7 Change in official reserves -5.6 0.1 -1.0 -0.9 -1.5 Errors and omissions 13.7 -7.1 -31.7 -25.2 -3.1 Source: Adapted from BANCA D(cid:146)ITALIA 2012 Annual Report. 2.2.3 Global Benchmarks of Italy(cid:146)s Economy The World Bank Report on Doing Business 2013, based on the criteria of the International Finance Corporation (IFC), ranks Italy in the 73rd out of 185 countries in terms of business friendliness. (Italy ranked 87th in 2012.) Italy falls below all other industrialized OECD countries, as well as countries such as Belarus (58th) and Rwanda (52nd). Several specific indicators relating to Italy have deteriorated, including building permits (103rd), access to credit (104th), enforcing contracts (160th), and high corporate taxes (131st). On a positive note, Italy ranks 31st on resolving insolvency, possibly due to Italy(cid:146)s 2007-2009 reforms to its bankruptcy procedures that promoted debt restructuring and pre-bankruptcy agreements. 7 COUNTRY PROFILE- ITALY 1435-2013 The World Economic Forum(cid:146)s (WEF) 2012-2013 Global Competitiveness Guide ranks Italy 42nd out of 144 countries with a score of 4.5 on a seven-point scale. Italy was the lowest ranked G-7 country, but scores better on the sophistication of its business environment where it ranks 2nd in the world for its business clusters and 2nd in the world for breadth of the value chain executed in-house by companies. The WEF ranks Italy 127th in labor market efficiency. The WEF ranks Italy 97th overall for its institutional environment. 2.2.4 Important Sectors of the Economy Italy(cid:146)s economy (the 9th-largest in the world), is fully diversified and dominated by small and medium-sized firms (SMEs), which comprise 99.9% of the number of businesses in Italy. It is an original member of the 17- nation Eurozone. Germany, France, the United States, Spain, Switzerland, and the United Kingdom are Italy’s most important trading partners, with China continuing to gain ground. Tourism is an important source of external revenue. Italy continues to lag behind many industrialized nations as a recipient of direct foreign investment. Italy(cid:146)s high level of public debt, negative economic growth, and rising sovereign debt yields led the government to introduce austerity measures and structural reforms in 2011 and 2012. Most of these actions took place under the leadership of Mario Monti, who led a Non-Elected, technical government until his resignation in December 2012. Monti(cid:146)s actions included addressing Italy(cid:146)s rigid labor markets, opaque tax and commercial laws, rampant tax evasion, and excessive regulation through seven reform packages that were approved by the Italian parliament. Italy(cid:146)s relatively affluent domestic market, proximity to emerging economies in North Africa and the Middle East, and assorted centers of excellence in scientific and information technology research, remain attractive to many investors. The government of Italy (GOI) in 2012 remained open to specific foreign sovereign wealth funds to invest in shares of Italian companies and banks, and continued to promote investment opportunities online. GOI efforts to sell Italy as a desirable direct investment destination were 8 COUNTRY PROFILE- ITALY 1435-2013 overshadowed in large part by the Eurozone financial crisis, Italy(cid:146)s economic downturn, and setbacks to Monti(cid:146)s reform program. However, as Italy(cid:146)s fiscal situation stabilized in 2012 and reforms were implemented, international investor interest rose in Italy(cid:146)s sovereign debt auctions. Legislation passed in 2012 provided investment and tax incentives which bolstered infrastructure spending in targeted areas. In many sectors, the unit values of Italian exports rose more than the prices applied in foreign markets, especially those related to fashions and clothing. This could be viewed as a sign of upgrading of the quality of the products exported by Italian firms, in response to heightened competitive pressure in markets abroad. However, other empirical evidence does not fully corroborate this interpretation. The prospects of Italian exports will also depend on their ability to intercept the demand for (cid:147)affordable luxury(cid:148), which is expected to grow rapidly in the emerging countries in the coming years as the upper-middle class and women increasingly participate in education and employment. With this objective in mind, distribution channels and technology will have to be adapted to the new market trends. In the following diagram, the size of the circle indicates the sector(cid:146)s share of the global exports while the red (green) colors indicates the historical decrease or (increase) curve for each sector. Italy’s market shares of world exports by sector Source: ICE on data published by Eurostat and national statistical institutes 9 COUNTRY PROFILE- ITALY 1435-2013 Agriculture Agriculture is one of Italy’s primary industry sectors, accounting for 2% of GDP in 2012. The most important products are grains, sugar beets, soybeans, meat and dairy products -- especially in the North of the country -- and fruits, vegetables, olive oil, wine and durum wheat in the South. Italy is the world’s fifth-largest exporter of agri-food products. Italy has a diversified industrial economy with roughly the same total and per capita output as France or the United Kingdom. Italian industries, including the food processing sector, rely heavily on imports of raw materials. Italy(cid:146)s major food and agricultural trading partners are EU Member States, with neighboring France and Germany each accounting for slightly less than a fifth of Italy’s agricultural trade. Italy is one of the largest agricultural producers in the European Union (EU). The EU remains Italy(cid:146)s most important trading partner with the top five suppliers being France, Germany, Spain, the Netherlands, and Austria, while the main importers of Italy(cid:146)s goods, in addition to Germany and France, were the United States, followed by the UK and Spain. Among Italy’s food exports pasta, virgin & extra-virgin olive oil, canned tomatoes, cheese, biscuits and baked goods. Due to its large food processing sector(cid:146)s need for inputs, Italy has become a net agricultural importing country. Italian perception of the place and role of Italian food in the global marketplace ties into the issue of protected designations of origin, or geographic indications, which represent only a small fraction of the value of total food production yet loom large in Italy’s national marketing of its food exports as ’high quality and Italian(cid:148). Tourism The growth of the Italian tourism industry slowed in 2012 as the country entered another recessionary period. Besides the nation’s economic contraction, a decline in investment and consumer spending was also recorded. According to the National Statistic Institute (Istat), the economy contracted by 2.6%, investment decreased by 2.3% and domestic consumption declined at a rate of 0.7% over figures from 2011. Growth in 10