IKEA AB’s plan to open a third store in Rome have been wrapped up in red tape for seven years with the Swedish furniture multinational joining a queue of willing investors beginning to lose patience with Italian bureaucracy.
IKEA is the latest in a series of big names – including oil major Royal Dutch Shell PLC and U.K. gas producer BG Group – to be frustrated by a labyrinthine bureaucracy of contradictory rules that often vary from one region to the next.
“For us, as foreign investors in Italy, it is simply not acceptable to work on such a long time frame,” IKEA Italy chief executive officer Lars Petersson said.
The Rome outlet is not the first headache for IKEA. The group, which has 20 stores in Italy, spent years trying to open stores in Padova and Pisa which were held up by paperwork.
“I was CEO in Japan for six years and permitting times were long there, too, but three years before opening the store in Fukuoka we knew that on Feb 18, 2012, at 0900 we would open. This is crucial for planning,” Mr. Petersson added.
IKEA has earmarked €115-million ($147-million) for the store and is worried if it does not open soon it could lose clients.
“It (the licensing process) is going ahead, but we have no idea when it will end,” Mr. Petersson said.
The government of Mario Monti has been quick to acknowledge the heavy costs to business of red tape and its detrimental effect on attracting investments at a time of rising unemployment. But companies are not yet seeing any significant improvement in the business environment.
Between 2005 and 2010 foreign direct investment into Italy represented only 1.4 per cent of the country’s economic output, half that of Germany and France and less than a third that of Britain.
On Thursday the government approved a development decree aimed at hacking back red tape and making public administration leaner and quicker.
In its 2012-2013 Global Competitiveness Report, the World Economic Forum said inefficient government bureaucracy was the second most problematic factor for doing business in Italy, behind high taxes.
But if Ikea remains committed to Italy, other foreign investors are less so.
Earlier this year U.K. gas producer BG Group threatened to shelve plans to build a liquefied natural gas plant in the southern region of Puglia after failing for 11 years to obtain all the necessary permits.
Grassroots opposition to a string of infrastructure projects has also compounded pending bureaucracy problems.
“Red tape is very often the upshot of local resistance that does not have any other way to express itself,” an energy industry expert said, wishing to remain anonymous.
In a report on Italy last month Morgan Stanley said construction permits in Italy took more time than elsewhere in Europe and often cost three times as much.
Concern is also growing that oil major Royal Dutch Shell may pull out of a project to build a natural gas terminal in Sicily after having spent seven years wading through paperwork. In 2005 investments on the plant were seen at €400-million.
A trade unionist close to the matter in Sicily, where unemployment is higher than the national average of around 9 per cent, told Reuters that Shell had already decided to give up on its plans.
But a spokesperson for the oil company said no decision had been made yet and that the company “is assessing the situation.”
“It’s a complex process and I can see why companies get disheartened. The Region is against the project and it’s the Region that has to give final approval. Maybe things will change after the upcoming elections there (at the end of October),” said Italian Employers Association vice-president Ivan Lo Bello.
Italian energy company ERG earlier this year said it was pulling out of the joint venture with Shell to build the terminal.
Rome has said it intends to streamline the permit process by creating a single licensing procedure as in other European countries to replace the fragmented system which can involve two to three stages of approval.