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Is France still attractive for foreign investments?

Polska wersjaIn the last post we asked ourselves about the subject ofFrance’s competitiveness as well as its ability to attract foreign investments.

The highly anticipated annual results of the International Institute for Management and Development (IMD) at the international level are relentless:  in terms of attractiveness, France is ranked 29th of 60 countries.  Even more interesting than this seemingly high number is noting that France is still descending this scale in terms of international attractiveness:

–         Regarding France’s overall competitiveness,  it has gone from 25th place in 2008 to 29th in 2012

–         On economic performance, from 13th place in 2008 to 22nd place in 2012

–         Concerning commercial effectiveness ,  it has dropped from 35th to 45th place

Avoiding the typical French flaw of being too self-degrading, other of France’s counter performances are recognized in the IMD report:  59th place for fiscal policy, 25th place in business legislation, and finally 59th concerning the values and attitudes of the French.

The best French results come from the level of pricing (12th place), the social environment, the efficiency and productivity (18th place) and infrastructure (9th place).

Likewise at the European level, the 2011 Ernst & Young Attractiveness Barometer reported decline regarding France’s competitiveness, yielding its second place standing to Germany, after England, concerning the attractiveness of European countries.

This barometer gives us very specific information onFrance’s strengths and weakness for foreign investors.  The descent to the next level would explain more by the more competitive strategies used to enhance German and English competitiveness than by the weakness ofFrance.  That’s to say thatFranceis still not playing its role in globalization.

Despite its prime geographical location in Europe, being home to many leading companies in strategic sectors, and possessing an internationally renowned educational system and high quality infrastructure, France’s historical assets wouldn’t be more convincing abroad.

France’s poor 59th IMD ranking confirms that France’s main problem is cultural.  The French would have trouble seeing globalization as a positive opportunity.

Another large disappointment was in 2011 when France attracted only 23 establishments from BRIC countries, while Germany attracted 69.

But there is good news to be taken from this study: France occupies the first place ranking in Europe for industrial establishments.

And yet for the BRIC, when it comes toFrance, the first things that come to mind are the French stereotypes: art, luxury, and gastronomy. It knows less of its current, more realistic assets especially in industry.

In order to compete with these new country investors who are just as worthy of seduction as any, France should make better use of its strategic sectors, return SMEs to the center of its economic development and see new investments as a window to opportunity rather than unfair domination.

The SMEs and large multinational companies that were surveyed, mention the following improvements that will enhance France’s competitiveness: more support for research and innovation (56%), improvement of the economic and business environment (54%), and better international sustenance (46%).

Like a company, France must set itself apart from the others and play the “nation branding” card to promote itself.  This would be made possible by the creation of a business friendly environment and legal and fiscal marketing.

It is true that the rate of corporation tax in France is the third highest in the world after Japan and the United States, but other contributing factors to the total taxation are often overlooked by international rankings, especially ground rules more favorable inFrance, tax credits, and the level of TVA which remained at a 19.6% average.

In addition, certain investors consider the cost of work and the lack of flexibility of the business environment to be the main hindrances to their attractiveness.  Yet, this lack of flexibility has kept us, at least for a time, from a rapidly growing unemployment rate when the 2008 crisis struck.  There exists a vivid memory of a foreign enterprise based in France, which took advantage of the crisis to obtain market shares during the height of the crisis, stabilizing its work force.  At the same time, other companies abroad were seeing decreases in numbers and activity.

These figures and data must be studied in depth compared with those of other countries in order to fully understand in which areas we are losing in terms of competitiveness at a European and at global levels. What needs to be taken from these evaluations is that this downturn is not to be considered as inevitable.  The evaluated studies show that France’s strengths are just waiting to be valued in the respects of foreign investors as well as in ourselves.

Written by Cecile Dekeuwer (c.dekeuwer@thelegalbloginfrance.com )

Translated by Marisa Delchert

 

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