Italy: Still a favorite destination for Islamic investors (Part I)
Although Italy has not yet been able to introduce a dedicated tax and legal framework for Islamic finance, and the industry has not really taken off in the country, it still remains a very attractive investment destination for Islamic investors.
Indeed, Italy is the third-largest economy of the eurozone and the eighth-largest in the world, with a GDP of some US$2 trillion, immediately after India, but bigger than Russia. The domestic market offers many opportunities, with a population of more than 60 million. Italy represents a strategic gateway to 500 million consumers across the EU and to 270 million in northern Africa and the Middle East, and is the main thoroughfare linking southern Europe to central and eastern Europe.
For over 30 years, Italy has been the second-largest manufacturing economy in Europe after Germany, and the 6th-7th top world manufacturer. Italian manufacturing trade surplus is the fifth among G-20 countries, exclusive of energy and mining, with a value of EUR96 billion (US$113.12 billion) in 2014. Italy holds leadership positions for trade surplus in 935 products out of 5,117 marketed goods (the most detailed breakdown of world trade by industry): first in 235 products, second in 377 products and third in 323 products.
Investing in Italy means having access to unique export know-how in leading sectors, such as machinery and automation, fashion, design and food. Companies investing in Italy can also rely on extensive networks of SMEs and many industrial clusters throughout the country that are able to supply high-quality intermediate products specifically tailored to meet customers’ needs.
Italian cities are overflowing with ancient monuments and treasures and these, combined with its world-famous art, culture, music, food, and quality goods, give Italy an unparalleled quality of life.
Furthermore, after years of stagnation if not recession, the Italian economy is now recovering. Italy’s GDP advanced 0.4% in the three months to June 2017, unrevised from the preliminary estimate and following an increase of 0.4% in the previous period. The expansion was driven by firm consumer spending, a rebound in fixed investment and inventory accumulation. On the production side, industry and services activity expanded, while agriculture contracted. Year-on-year, the economy grew 1.5%, the most since the second quarter of 2011.
Trying to benefit from this situation, GCC countries have been very active in Italy in the last few years. For example, Qatar, through different entities, has invested signifi cantly in real estate, airlines, luxury hotels and fashion; Abu Dhabi-based Aabar Investments has invested in Unicredit; Bahrain sovereign fund Mumtalakat recently invested in KOS, a company leader in health and social care; and sovereign fund Kuwait Investment Authority entered into the Italian Strategic Fund.
But could this flow of investment be enhanced if specific asset classes are tailored to Islamic investors? More on this in Part II.
This article was first published in Islamic Finance news Volume 14 Issue 44 dated the 1st November 2017.