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INVESTMENT

France sees record foreign investment but…

Despite the doom and gloom France has seen a healthy jump in foreign investment, a new report by Ernst and Young has revealed. But the country's notoriously complicated tax and administrative systems plus high labour costs are holding it back.

France sees record foreign investment but...
France is proving to be more attractive to foreign investors, especially for industrial projects. Photo: AFP

First the good news.

France is proving more and more attractive to foreign investors, especially when it comes to investing in industrial projects, a new financial report from Ernst and Young concludes.

The amount of foreign investment in France in 2014 saw an 18 percent rise on the previous year reflected in 608 new projects. That compares to the European-wide average increase of just 10 percent.

And 68 percent of foreign bosses polled in the report had a view that was rather positive or positive of France.

“The result is a reflection of the strength of logistics in France and its role as a platform at the heart of Europe,” said Ernst and Young's Marc Lhermitte.

And the bad news.

The country is still way behind the UK when it comes to enticing international businesses to invest in the country. Britain saw 887 new investments from abroad, while Germany saw 763 new projects.

The problem for France is also that these foreign investors are creating fewer jobs. The reason France lags behind is blamed on the old gripes of the cost of labour, the tax system and the regulations.

Out of all the new investments last year, only 12,577 jobs were created, which reflects a drop of 11 percent on 2013.

Ernst and Young found it was the opposite scenario across most of Europe where, in general, an increase in investment meant an increase in jobs.

The report said that companies felt penalised by the cost of labour and lack of flexibility in the French market and compared it to the “hyper-flexibility” of the jobs market in the UK, which is famous for its much-criticized zero-hour contracts.

French magazine L'Express pointed out that a new corporate tax credit named CICE aimed at increasing competitveness has helped reduce the cost of labour in industry by 6 percent and that it is now inferior in France to the costs in neighbouring Germany.

But Ernst and Young says more needs to be done.

“The cost of manufacturing in France remains above the European average. France has struggled to justify its price,” read the report.

'It's possible the recovery in France has been slower because of the inflexibility of the labour market compared to other European countries,” said Lhermitte.

Much of the foreign investment in 2014 was by companies already established in France expanding their businesses, but Ernst and Young said entirely new investors were still cautious.

“Previous investors have already mastered the legal and administration systems and French regulations but not new investors, he said.

But Ernst and Young's Marc Lhermitte said it wasn't a case of France just following the British model as a route to success, but rather following a previous report by French industrialist Louis Gallois that called for a massive simplification of the system.

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SYRIA

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.
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