News Analysis: Italy plans to invest in business innovation, a 'bet on the future'

By Eric J. Lyman

ROME, March 11 (Xinhua) -- In an attempt to help jumpstart Italy's moribund economy, Italian Minster of Economic Development Luigi Di Maio has announced a one-billion-euro plan to help support startup companies and boost economic innovation.

The funds, equivalent to 1.12 billion U.S. dollars, will be used for business loans, research and development, tax relief, refining ideas and in many ways helping stand in for a venture capital sector largely absent in Italy.

Unveiling the plan, Di Maio called the initiative "a bet on the future" that will help make the economy more dynamic while stemming the tide of educated young Italians leaving the country in search of work.

"This is the first act," Di Maio said. "Everything we do from here on out will revolve around this these. It will be at the center of future policies."

A GOOD START

Flavio Notari, a John Cabot University professor and a fellow with think tank Competere, said it was too soon to judge the long-term implications of the proposal.

"We don't know the specifics of how the money will be used and some might argue that the amount is low," Notari, who specializes in start-up companies, told Xinhua. "But it's a good start. It won't resolve problems on its own but it's a good start."

Europe has long trailed the U.S. in terms of spending on new ideas, according to Stefano Denicolai, an innovation management professor at the University of Pavia.

Denicolai said Germany, France and Italy, the three largest economies in the eurozone combined have less venture capital available for startups than that of Silicon Valley, California, the high-tech hub near San Francisco that gave birth to hundreds of tech companies including Apple, Google, Cisco Systems, and Hewlett-Packard.

But Italy even trails lower European levels in high tech business development. In recent years, only 178 of the 5,600 European Union startups were based in Italy, according to Italian media reports.

Similarly, only 1.3 billion euros (1.5 billion U.S. dollars) of the 81 billion euros (91 billion U.S. dollars) was spent on Italian companies. Those figures translate to 3.2 and 1.6 percent of the European Union total, respectively, in a country with a gross domestic product worth around 12 percent of the total EU economy.

EFFICIENCY MATTERS

Furthermore, in Italy, most of the funds available for startups come through slow-moving and often risk-adverse institutions like the Cassa Depositi e Prestiti, an investment bank controlled by Italy's Ministry of Finance.

That could be a flaw in Di Maio's plans, Denicolai said, because much of it appears to depend on the existing infrastructure of the Cassa Depositi e Prestiti to evaluate potential startups and to distribute funds.

"This plan addresses a real problem, but it would be better if the plan would also reduce the bureaucracy new companies face, and to encourage risk takers," Denicolai said in an interview. "But something has to be done and I would argue that it is better to do something that is imperfect than it would be to wait for the perfect plan and do nothing until it is ready."

One idea Denicolai suggested was using the money as a kind of matching fund for private investments.

"With this idea, private investors do the research and evaluate and if they like what they see, the money they invest is matched by the state's money," Denicolai noted. Enditem