Sunday, July 23, 2006

Reforms to Make Italy More Consumer Friendly: Pharmacies, Taxis, Lawyers Now - Utilities Next

The ANNOTICO Report

Despite bitter protests against Liberalization from Left Wing Activists, the consumer will benefit from creating more competition, bringing down prices, and creating greater efficiency. Supermarkets  will be allowed to sell medicines, more taxi licences are to be issued , and lawyers must be more transparent about costs and services.

 The next phase will take on the powerful municipalities, which dominate local services provision. Utility prices are among the highest in Europe. The higher costs for Italian companies make them less competitive in export markets.

Protesters swept aside as Italy pursues reforms

Business Online, UK

By Robert Galbraith in Milan
23 July 2006

Italys government is pushing ahead with its liberalisation programme despite bitter protests within the affected sectors and from left-wing activists.

Pharmacy owners, taxi drivers and lawyers are just some of those who have taken to the streets or gone on strike after the government introduced a decree liberalising important service areas. Supermarkets will be allowed to sell medicines, more taxi licences are to be issued and lawyers must be more transparent about costs and services.

The protests have forced some concessions as the new law passes through parliament but the thrust of the reforms has been unaffected.

The government is hoping the liberalisation will create more competition, bring down prices and create greater efficiency. In the next phase it plans to take on the powerful municipalities, which dominate local services provision.

According to Confservizi, a trade association, the local utility and service industries in Italy are worth E23.6bn ($29.9bn, #16.1bn) in annual revenues. They employ 160,000 people and made E905m in profits between them last year.

Municipal or regional authorities are the sole shareholders in 73% of all local utilities in Italy. Another 24% of the companies are controlled by private and public shareholders. Just 3% of the utilities are owned by private companies.

The Rome utility, ACEA, which is listed on the stock market, is 51% owned by the Rome city council. AEM, the Milan equivalent is one of the exceptions; the city council owns only 40%.

Utility prices are among the highest in Europe. The higher costs for Italian companies make them less competitive in export markets.

Italys competition regulator has fought a long battle with the local authorities and their control of utilities, which it calls local monopolies that do not allow new entrants into the market.

Previous efforts have failed and the head of the competition regulator, Antonio Catricala, is anything but optimistic about the chances of success this time. In his annual report this month he said that as long as the power to privatise and the tendering of services remains with local politicians it will be difficult.

The government is hoping it can force local authorities to open up the markets. A deputy economy minister said last week that the plan is to create giants in local utility markets. The economies of scale would allow them to provide the same services at lower costs.

He pointed to France and Germany as examples that Italy should try to follow. That suggests it will be large companies such as Enel as well as the bigger utilities such as AEM and ACEA that will benefit.

All these companies are controlled by national or local government. It may be that the governments liberalisation programme does not include meaningful privatisation.

http://www.thebusinessonline.com/

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