Despite suffering heavily in the wake of the global financial crisis, Italy-Ukraine economic ties remain strong.
The Mediterranean peninsula is Ukraine’s third largest trading partner among European Union countries, after Germany and Poland, with bilateral trade exceeding $4 billion in 2012.
In his interview with the Kyiv Post, Italian Ambassador Fabrizio Romano said the companies currently in Ukraine would invest more, and others would follow, if only the regulatory and business climate would improve. Romano, 54, said he highly appreciates the recent improvements in Ukraine’s legislation, including the adoption of a new Customs Code, but added that increasing fiscal pressure is holding back the full potential of relations between the two countries.
“The two industrial models (Italian and Ukrainian) are potentially complementary. I see a good possibility to increase both trade and investment,” Romano, who is in Ukraine since 2012, said.
With around $1 billion invested in Ukraine since 1991, there are more than 300 Italian companies officially operating in Ukraine.
But Romano notes that Italian-origin investments are strongly underestimated since most of them were made through foreign subsidiaries. “The real amount of Italian investment is about $4.5 billion,” he said.
The clearest examples is Italy’s UniCredit bank, Italy’s top investment thanks to a 2006 purchase of a Ukrainian bank for an estimated $2 billion, which technically counted as a Polish and Austrian investment.
Nonetheless, the list of official investments is long, with financial group Intesa Sanpaolo, energy giants Eni and Sapiem, food and beverage companies Ferrero, Campari and Martini, construction materials firms Mapei and Zeus, textile and footwear maker Inblu, and Danieli in metallurgy.
Despite Italy posting a €564 million trade deficit in 2012, trade relations are catching up, according to Romano, given that the deficit halved from €1.1 billion 2011. Moreover, he pointed to a deep involvement of Ukrainian officials in developing bilateral relations.
“I always experienced, in my relations with authorities, a great interest in the Italian presence here, a desire to have more Italian entrepreneurs here investing and of course a desire of having seeing our trade balance grow,” he says.
For example, Italian road builder Todini recently won a €185 million tender to reconstruct sections of the Kyiv-Kharkiv highway – the result of a trade mission that took place in Kyiv and Odesa last summer.
On the flip side, there are still a number of issues that have a negative impact on Italian businesses and are pushing potential ones away, according to Romano.
“The problem number one Italian enterprises are experiencing in Kyiv is connected to VAT (value added tax) refunds and fiscal pressure,” he says. “That’s something that should be taken into consideration (by Ukrainian authorities). If the fiscal pressure increases (investors) will probably change their attitude.” he adds.
He also pointed to Ukraine’s request to renegotiate 371 tariff lines in the World Trade Organization as a “source of perplexity for Italian investors and traders.”
The recent increase of import duties for some categories of motor vehicles has also become a source of concern for many EU countries, including Italy, according to Romano.
“We produce large range of motor vehicles, which are quite popular in Ukraine,” he says, adding that the duties hit sales hard.
Meanwhile, Ukraine could learn from Italy’s industrial experience. Whereas Ukraine’s market is dominated by large companies, elements of the Italian model can be taken as an example, Romano says.
Italy became Europe’s second largest manufacturer based on an industrial system of mostly micro, small and medium enterprises, according to Romano. This economic phenomenon is being studied by many countries worldwide, he added.
“There are more than three million firms in Italy (employing less than 10 people). Our structure may make it more difficult to expand on foreign markets, but at the same time it has more flexibility and creativity (than large corporations),” Romano says.
Regarding Ukraine’s aspirations to join the European Union, Romano says Italy is supporting it and is actively involved in the process of Ukraine fulfilling EU requirements.
“Becoming a full member of the EU is a sort of a road map. You have to fulfill different conditions. At the moment we’re working together with the Ukrainian government in order to fulfill the criteria and hopefully sign the association agreement in Vilnius in November,” Romano says. “Italy is one of the founders of the EU and it was always open to a further development of it. So let’s work on this road map, let’s first sign the agreement,” he adds.
Italy at a glance:
Territory: 301,340 square kilometers
Population: 61.4 million (estimated for July 2013)
Government type: parliamentary republic
Head of government: President of the Council of Ministers Enrico Letta (since April 2013)
GDP (purchasing power parity): $1.8 trillion
GDP per capita: $30.1
Main industries: tourism, machinery, iron and steel, chemicals, food processing, textiles, motor vehicles, clothing, footwear, ceramics
Ukrainian-Italian economic relations:
Trade: $4.042 billion on 2012
Exports from Italy to Ukraine: furniture, footwear, clothing and mechanical industry, particulary industrial machinery and construction equipment
Exports from Ukraine to Italy: metallurgy products (iron and steel and their products, such as tubes, rods and profiles), wood, agricultural products (sunflower oil, wheat, soya beans), skins, coal and gaseous hydrocarbons.
Italy’s investment in Ukraine: $1 billion
Ukraine’s investment in Italy: $0.4 billion
Source: ISTAT, CIA Factbook, state statistics
Kyiv Post staff writer Anastasia Forina can be reached at [email protected]
