* Cabinet to unveil draft proposals on Thursday
* Tax breaks, streamlined procedures, funding incentives
* Foreign investment slumps during crisis
By Francesca Landini and Giuseppe Fonte
ROME, Sept 18 The Italian cabinet on Thursday is
set to unveil tax incentives, consulting services and faster
start-up rules for foreigners doing business in Italy, the first
step in a drive to lure more foreign investment to the
euro-zone's third-largest economy.
The measures will be contained in a draft programme called
"Destination Italy", drawn up by ministries with input from
businesses including oil giant Eni SpA and intended to
form the basis for legislation later this year.
"Predictability on tax issues, authorisations and business
rules is what we want to give foreign investors," said Fabrizio
Pagani, an economic adviser to the prime minister who helped
draft the measures.
Recession coupled with more deeply-rooted problems, such as
high corporate taxes and a labyrinthine justice system, have
slowed foreign investment.
Some $9.6 billion was invested last year, down from an
annual average of $36.6 billion in 2005-2007, a period that is
considered a good indicator of pre-crisis flows according to the
United Nations Conference on Trade and Development, a
multilateral organisation that promotes international trade.
The government hopes to help foreign investors by
concentrating all commercial lawsuits involving non-Italian
firms into three cities - Milan, Rome and Naples - rather than
have cases scattered across the country.
It also hopes to introduce fast-track tax consulting for
foreign companies and to reduce the amount of time it takes
businesses to obtain the paperwork needed to build factories.
Prime Minister Enrico Letta's left-right coalition
government has been paralysed by infighting as it seeks to
address Italy's worst postwar recession.
As an example of the challenges foreign investors face, the
draft cites a World Bank survey ranking Italy 103rd in the world
in terms of how easy it is to get construction permits.
More specific measures include making it easier and cheaper
for small firms to access capital other than through bank loans,
which have dwindled over the past years, and tax breaks to
encourage more smaller companies to seek stock market listings.
It also confirms the government aims to provide, by the end
of October, a list of planned privatizations and reiterates a
pledge to lower the tax burden for companies.
"Italy is too slow in giving the green light to foreign
investments, while uncertainties in the way fiscal rules are
applied and the length of judicial trials also keep foreign
investors away," said Sandro De Poli, head of General Electric
in Italy and a member of the advisory committee together
GE has been one of the relatively small number of major
foreign investors in Italy since 1994 when it acquired Nuovo
Pignone, a specialist in machinery for the oil and gas industry.
Last year, it bought the aviation unit of Italian aerospace
supplier Avio for $4.3 billion.
Other companies have not been as successful. Energy giant
British Gas, for example, left the Italian market last
year after having spent 10 years in a fruitless effort to win a
licence to build a regasification plant in southern Italy.
Spain attracted $28 billion in 2012, three times the volume
of Italy's foreign investment. Despite Spain's crippling
economic downturn and high unemployment, economists say the
country has embarked on more ambitious structural reforms,
particularly to its labour market.
The World Bank ranks Spain 44th in the world in terms of the
ease of doing business, compared to Italy's 73rd ranking.
Germany ranks 20th and France 34th. One result: French retailer
Fnac plans to open 12 new stores in Spain by 2015, with an
investment of 100 million euros, while it sold its Italian
stores last year.
Car companies Renault-Nissan, Ford, Iveco
and Seat have all announced big investments for their
Spanish plants, according to ICEX, the Spanish institution that
support foreign investments.
Luca Manzella, former CEO at British Gas Italia, now senior
adviser at Arthur D. Little, says the new measures envisioned by
the government are a start but there is a long road ahead in
convincing investors back to Italian shores.
"Dedicated desk and courts for foreign investors are a good
idea over the short-term, but it won't be enough," he said.
(Editing By Alessandra Galloni and Janet Lawrence)