France more attractive, but still lagging behind

There was both good and bad news for France on the economic front on Tuesday. A new study suggested foreign investors were returning to the country, but it was still some way behind Germany and the UK. A high tax burden and labour costs appear to hold it back.

France more attractive, but still lagging behind
Foreign investors are returning to France but it still lags behind the UK and Germany for attracting foreign investors. Photo: FDcomite/FLickr

According to an annual study by Ernst and Young, France is once again proving more attractive to foreign investors – news that will give President François Hollande and his Socialists reason to feel relieved, if only slightly.

Ernst and Young found that the number of foreign firms launching new subsidiaries or extensions of existing ones in France in 2013 was 514, an increase of nine percent on the 471 companies who set up outlets in France in 2012.

“France has not reached its pre-crisis level but it has reversed the downward trend, observed since 2010,” Ernst and Young notes. In terms of jobs, 14,122 were created in France last year by foreign investment, compared to 10,542 in 2012.

The sectors that attract the most foreign investment continue to be the country’s highly regarded energy sector, followed by transport and digital technology.

In terms of attracting foreign industry, France remained top of the European league table, although the downside was that the 166 new industry projects did not create many new jobs.

French economy minister Arnaud Montebourg was quick to jump on the positive aspect of the report.

The study “illustrates the vigorous efforts made by the government over the last two years to regain competitiveness and to preserve and increase the attractiveness of the French territory and stimulate job creation,” he said in a statement.

The study also highlighted the positive aspects of investing in France.

“France has some incredible talent, skilled labour, good productivity of labour, management skills and engineering excellence,” the study said.

Marc Lhermitte from Ernst and Young also pointed out that contrary to popular belief France does have good quality administrative services to welcome foreign companies wanting to invest in France.

But that was about the extent of the good news.

The problem for France remains that it is still proving to be less attractive than its main European neighbours Germany and the UK.

Germany saw an increase of 12 percent in the number of foreign firms launching projects in the country last year – 701 in total –and the UK registered a 15 percent increase – for a total of 799 projects set up.

Ernst and Young also stressed that France’s economy was still proving less attractive that its neighbours for attracting companies from the emerging BRIC countries (Brazil, Russia, India and China).

“France still fails to attract projects from other emerging investors. There were only three from India and two from Brazil,” the study said.

Most of the subsidiaries launched in France in 2013 were from the United States – 127 – worth around 25 percent of the total number of projects. That compared to only 19 from BRIC countries.

For the sake of comparison, Germany welcomed 107 new subsidiaries from BRIC countries and in the UK it was 87.

“If France wants to allow itself to dream, it must accept the inexorable tilting of the centre of gravity of the world economy towards emerging economies,” Gerald Karsenti, president of HP France, told AFP.

Karsenti also points to a lack of “coherent” communication.

“If for example most French people don’t know that Grenoble is ranked fifth in the Forbes list of most innovative cities in the world, how would a foreign investor know?” he says.

The study contained further uncomfortable reading for France. Only 34 percent of investors believe the attractiveness of France will increase in the next five years, slightly up on the 27 percent who felt the same in 2012. However the rate of confidence in the German economy for the next five years stands at 49 percent for Germany and 54 percent for the UK.

The problem for France centres on a few old gripes.

Investors want the tax burden reduced on companies as well as a reduction in labour costs and measures to improve the legal environment for businesses.

The French government recently announced measures to try to make France more attractive to foreign investors.

Apart from Hollande’s Responsibility Pact, which is aimed at wiping €30 billion of payroll charges but is yet to take shape, the president recently announced plans to launch “talent passports” to allow foreign graduates, innovators and investors the chance to stay in France for a number of years.

Hollande said the move could impact on between 5,000 and 10,000 people.

And the system of residence permits for students will be altered so visas correspond exactly to the length of their studies.

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French group to open two hotels in Damascus

France's Louvre Hotels Group has signed an agreement to open two hotels under its own name in Damascus, the first with a western hotel operator since Syria's brutal civil war began in 2011.

French group to open two hotels in Damascus
Louvre owns the Golden Tulip five-star brand. Photo: Louvre Hotels Group
The confirmation of the two hotels opening, after recent media reports, came a day after the UN announced an internal investigation into the bombing of hospitals in Syria, and as at least six civilians were killed by the Syrian regime and Russian fire in northwestern Idlib province in the past days, according to the Syrian Observatory for Human Rights.
The region of around three million people, many of them displaced by fighting in other areas, is one of the last holdouts of opposition fighting against the forces of Syrian President Bashar al-Assad.
The Hayat Tahrir al-Sham alliance led by Al-Qaeda's former Syria affiliate controls most of Idlib as well as parts of neighbouring Aleppo and Latakia provinces.
The hotels “will open soon under the brand name of Louvres Hotels Group,” the company, which is owned by China's Jin
Jiang, said in a statement.
Louvre Hotels Group said the deal was signed between Syria's Nazha Investment Group and “a partner with whom Louvre Hotels cooperates in the Middle East”.
The exact number of people killed in Syria's war is unknown but hundreds of thousands have died.
Several dozen medical facilities with links to the UN have been damaged or destroyed by bombs this year. Russian has denied deliberately targeting civilian installations.
UN Secretary General Antonio Guterres on Friday said an internal inquiry would look into the bombing of hospitals in Syria which had previously flagged their coordinates to avoid air strikes.
“The deal is strictly in line with international law and all international directives regarding Syria,” the French company statement said.
According to the website, The Syria Report, it is the first agreement with a western hotel operator since 2011, when the devastating conflict began. Louvre Hotels Group was taken over by China's Jin Jiang in 2015 and it operates more than 1,500 hotels in 54 countries.