The French-American Chamber of Commerce (FACC) posted the following summary of a report recently carried out by consulting and accounting firm KPMG.
The full report is available here, entitled “Facts & Figures on France’s Investment Attractiveness”.
Probably a good idea to check out other resources as well.
There is an interesting report by The Economist in their “The World in 2013″ edition that highlights the likely challenges facing President Hollande’s administration in the next year including the difficulty in encouraging business growth and more investment.
While France remains a country that retains an attractive profile, there is a real risk that increasing taxes and a morose business climate could take hold and hamper growth in 2013. So although France has a lot to offer, it must make progress to improve the business climate and decrease unemployment. It’s not an easy time for Europe, and France will not be an exception. But as the adage goes, “no pain, no gain”.
From: Invest in France Agency
In the competition with other European countries to attract inward investment projects, France boasts a number of key strengths underpinning its investment attractiveness.
These advantages include:
- A large, dynamic market in Europe.
- A skilled, productive workforce.
- Recognized support to foster innovation.
- A plentiful supply of commercial real estate.
- Dense, high-quality transport infrastructure.
- High-quality energy and telecommunications at competitive rates.
- Renowned quality of life.
According to KPMG’s “Competitive Alternatives” biennial guide to business costs in over 100 cities in nine different countries, France stands out for having particularly attractive business setup costs, comprising labor costs, facility costs, transport, utility costs (electricity, natural gas, telecommunications) and corporate tax. In the 2012 edition, France was ranked fourth among the countries compared, up two places from sixth in the previous rankings (2010).
The Economist this week has a 14-page special report this week in its print edition that focuses on France, from its economy to politics, under the central theme of how economic structural reform is necessary in order to avoid a “time bomb” going off at the heart of the Eurozone. You can access the Nov. 17, 2012 print edition contents here. The leader article introducing the special report is here, and the special report link can be found at the table of contents site under “Special report: France” (there are 8 articles).
I’m delving into all this right now and encourage you to do the same. Even if you don’t agree with the magazine’s analysis, it is a highly-regarded publication for a reason: for asking important questions.
This is the not the first time the British news magazine has waxed poetic about France’s economic woes and potential for growth. Indeed, French economic and business paper Les Echos puts past covers and stories into perspective (in French).
What do you think are France’s biggest problems and do you think Hollande and Ayrault’s government can solve them?
I hope everyone had a nice Thanksgiving, and for those celebrating this weekend (comme moi), enjoy the festivities!
The Economist has an interesting piece in this week’s issue that talks about the newly automated line 1 of the Paris metro system which was completely outfitted with new technology and revamped to make it driverless.
Besides having better and more service during rush hour and a lower risk of accidents (automated line 14, which I take quite often, has had no accidents since its launch in 1998), the modernization of services also results in a welcome side effect for many: these automated lines will not be affected by the occasional public transport worker strikes since there are no drivers (see excerpt below).
What is your view on technology and innovation in France? Do you think labor costs are too high and discourages employers from hiring more often?
“…Strict labour laws, costly payroll charges and erratic strikes seem to make French firms especially keen on technology. Supermarkets, for instance, have enthusiastically adopted self-checkout tills. “All French hypermarkets have adopted this strategy over the past few years,” says Alexis Lecanuet at Accenture, a consultancy. The idea is to speed up queues at peak times for impatient non-technophobes carrying light baskets. But it also cuts costs. “Self-checkout has worked better in countries where labour is expensive,” says Serguei Netessine, a professor at INSEAD, a business school.
France excels at high-tech services: credit-card operated petrol stations, touch-screen fast-food counters, automatic car-washing. Two years ago, McDonalds pioneered the use of touch-screen, credit-card-based ordering in its French fast-food restaurants. Eléphant Bleu, a self-service high-pressure car-washing chain, has 472 outlets in France, and is expanding. All this in a country where the labour code runs to over 3,300 pages, an employer pays an average of 39% in payroll taxes, and unemployment is at 10%. Spot the connection.”
The Economist has an interesting business column that recently addressed the relationship that French workers have with their jobs. Over the past years, people abroad have heard of disgruntled factory workers “boss-napping”, holding different kinds of strikes and working 35 hour weeks. These are stereotypes, and most French workers are at the office more than 35 hours. In fact average work time for full-time employees is 41 hours) and all employees taken into account, 39.4 hours. I know I work more than that!
Incidentally it appears that often management teams at many French companies are responsible in part for this unhealthy relationship, as many directors come from a few grandes écoles (elite schools) and thus career advancement can be hindered within companies that retain top-down power structures with a few elite at the reins.
However, the article (below with some boldfaced parts) cites companies such as Danone which has been refreshingly open to basing promotions on skills rather than which elite school an employee attended. Other companies cited are Alcatel-Lucent and Schneider Electric.
What do you think? Do you agree, disagree? What is your experience working in a French company with French workers?
The French way of work
Managers must shoulder some of the blame for France’s troubled relationship with work
Nov 19th 2011 | from the print edition
EVERY year, Sophie de Menthon, a French entrepreneur, holds an event called J’aime ma boîte (I love my firm) in Paris. The idea is to counter the notion that the French don’t like work. Employees are enticed to make lip dubs (a video of them lip-synching to music, if you need to ask), massage each other, vote for the nicest colleague, arrange for the accountant to swap jobs with the secretary and other stunts to celebrate their firm.
The much-mocked campaign has not had much luck. In 2007 a national strike interrupted the festivities, and in 2009 a series of suicides at France Télécom spoilt the atmosphere. This year employees showed less love for their boîte than ever before. Only 64% of those polled liked their company, down from 79% in 2005.
A truer reflection of work attitudes came this summer when French workers covered office windows with huge pictures made up of Post-it notes. Employees at GDF-Suez, a utility, stuck thousands of them to the windows of its HQ near Paris to represent Tintin, a comic-strip hero. Société Générale’s bankers responded with a picture of Asterix and Obelix across six storeys. A few employers cracked down on the time-wasting, but most did not dare.
Many outsiders conclude that French workers are simply lazy. “Absolument Dé-bor-dée!” (“Absolutely Snowed Under”), a book which came out last year, described how state employees compete to do nothing at work. Another title in this bestselling genre on avoiding toil, “Bonjour Paresse” (“Hello Laziness”) by Corinne Maier, an economist, explained how she got away with doing nothing at EDF, another utility.
In fact studies suggest that the problem with French employees is less that they are work-shy, than that they are poorly managed. According to a report on national competitiveness by the World Economic Forum, the French rank and file has a much stronger work ethic than American, British or Dutch employees. They find great satisfaction in their work, but register profound discontent with the way their firms are run.
Two-fifths of employees, according to a 2010 study by BVA, a polling firm, actively dislike their firm’s top managers. France ranks last out of ten countries for workers’ opinion of company management, according to a report from 2007. Whereas two-thirds of American, British and German employees say they have friendly relations with their line manager, fewer than a third of French workers say the same. Many employees, in short, agree with Ms Maier, who recommends that chief executives be guillotined to the tune of “La Carmagnole”, a revolutionary song.
If French work attitudes are out of the ordinary, French management methods are also unusual. The vast majority of chief executives of big firms hail from one of a handful of grandes écoles, such as École Polytechnique, an elite science school. Through what is known as parachutage, they can arrive suddenly from the top ranks of the civil service. Air France KLM, for example, announced unexpectedly last month that its new chief executive would be Alexandre de Juniac, formerly chief of staff to Christine Lagarde when she was France’s finance minister.
Although the grandes écoles are superbly meritocratic—candidates compete against each other in a series of gruelling exams—their dominance of corporate hierarchies makes workplaces much less so. At a big French bank recently, a manager promoted an executive, only to be reproached by a furious rival who said he should have been given the job because he had done better in the final exams at the same grande école.
As Thomas Philippon, a French economist, pointed out in “Le Capitalisme d’Héritiers”, a 2007 book, too many big French companies rely on educational and governmental elites rather than promoting internally according to performance on the job. In the country’s many family firms, too, opportunity for promotion is limited for non-family members. This overall lack of upward mobility, argues Mr Philippon, contributes largely to ordinary French cadres’ dissatisfaction with corporate life. A study of seven leading economies by TNS Sofres in 2007 showed that France is unique in that middle management as well as the lower-level workforce is largely disengaged from their companies.
For those farther down the ladder, French companies are hierarchical, holding no truck with Anglo-Saxon notions of “empowerment”. And bosses are more distant than ever. A big change in French management, says Jean-Pierre Basilien of Entreprise & Personnel, a Paris research centre, is that industrial managers now seldom rise through the ranks. Fifteen years ago a leading graduate would have worked in factories before moving to headquarters. Now many come up via finance or strategy.
From the ranks
There are important exceptions. Danone, a food-products firm, is one. It has made a big effort to promote people solely on competence, says Charles-Henri Besseyre des Horts, a professor at HEC, a business school which is one of the elite grandes écoles. The 2006 merger of Alcatel, a French telecoms-equipment firm, and Lucent, an American one, created a less hierarchical group. Alcatel-Lucent even encourages teleworking, uncommon in France because it means trusting workers not to goof off. Jean-Pascal Tricoire, chief executive of Schneider Electric, an ambitious energy-management firm, came up from the ranks.
French companies have particular reason to worry now about their bad boss-worker relations. An important factor in the growing gap in industrial competitiveness between France and Germany, said a recent study by Coe-Rexecode, an economic-research centre, is that German bosses and employees are better than French ones at working together. French bosses badly need to follow in the footsteps of Danone and other modernisers. If they try and fail, then at least they can blame the workers.
It must be innovation week…
In another poll on innovation (Thomson Reuters Top 100 Global Innovators), France has 11 companies on the list (the 3rd most behind Japan with 27 and America with 40). The brilliant chaps over at The Economist have a nice article on this, below here for easy reading (France boldfaced for emphasis on my part).
Where innovation lies
Nov 16th 2011, 16:54 by The Economist online
Where are the world’s most innovative companies and what do they do?
Companies that make semiconductors and other electronic components are collectively the most innovative industry, according to an analysis of patents carried out by Thomson Reuters, an information-services provider. Its “Top 100 Global Innovators” report rates companies by the proportion of their patent applications that are granted; the number of “quadrilateral” patents (those granted in China, Europe, Japan and America); how often patents are cited by other companies; and whether patents relate to new techniques or inventions or are refinements of existing ones. This approach is intended to overcome the limitations of using the number of patents filed or granted as a measure of innovation. Of the 100 companies in the list, which is not ranked and relates to patent activity from 2005-2010, 40 are from America, 27 from Japan and 11 from France. No Chinese companies qualified. The report says this “underscores the fact that although China is leading the world in patent volume, quantity does not equate to influence and quality.”
The Economist has a long-running column “Which MBA?” and a recent post talks about something with which you are all likely well acquainted: the role of foreign languages in education. The article features two French schools: INSEAD and Grenoble School of Management.
Do you think that learning foreign languages is an important factor in deciding an MBA program?
Oct 18th 2011, 16:32 by S.H.
SPEAKING three languages wasn’t enough for Lenka Menden. When it came to choosing where to study for an MBA, she wanted a chance to absorb a new culture and learn yet another tongue. “My first language is Czech, I studied for a degree in business administration in Germany and I went on to take an MSc in Prague,” she explains. “I then worked for three-and-a-half years as an analyst at Morgan Stanley in Canary Wharf.”
Ms Menden turned down the chance of studying at London Business School, instead choosing IESE in Barcelona, because she thought it would open new doors. “Staying in London I would have been in the same environment and there wouldn’t be that many challenges. So I learned a new language alongside my MBA because Spanish is a very important language of business. I have extended my personal network to include people from Mexico, Spain and the Philippines. I can now work anywhere in Europe or in an emerging economy,” she says.
High-profile business schools still teach primarily in English. But many, especially in Europe, are beginning to realise that language tuition is a big selling point. The attraction of learning a language is two-fold. With so many alumni on the market, bi-lingualism distinguishes the exceptional MBA from the run of the mill. And in a global business, the ability to speak languages and understand cultures is vital.
INSEAD, which has campuses in France and Singapore, has a three-language requirement. Students joining its MBA programme must be fluent in English and proficient in at least one other. A third language of a student’s own choice is taught alongside the MBA. Facility in that language is a condition of being awarded an MBA. “It’s about developing a cultural sensitivity and is a way of becoming a global citizen,” says Leila Murat, the school’s assistant director of MBA admissions.
Mandarin is popular on both campuses. A quarter of students are of Asian origin and many Westerners come to the business school specifically to gain insight into doing business in China. Other emerging markets are shaping interest too: Portuguese and Russian are also becoming more popular, says Ms Murat.
Despite Anglophones’ reputation for lazyness in this area, such stringent language requirements don’t seem to be putting off English-speaking students. INSEAD has seen applications from America more than double in the past five years. Nevertheless, there are drawbacks. For one, teaching languages is expensive. The most effective method is face-to-face. That means recruiting native speakers.
But how easy is it to find a native Chinese speaker in a provincial city? At Grenoble Graduate School of Business in France, they can call on the university’s renowned languages department. But responding to students’ demands is not always easy. Japanese teachers are particularly hard to source, says Carol Gally, the school’s language co-ordinator. She says she often has to rely on the partners of people employed on the campus coming forward to teach.
Grenoble’s students are given 72 hours of language tuition over two semesters, with classes running into the early evening after the MBA teaching finishes. Compulsory French classes expose students to everyday situations, official documents and radio and television. Beginners start with the basics, such as how to shop, eat and drink. Other languages are then taught in the medium of French.
At IESE, learning Spanish is a big attraction for international students such as Ms Menden. Although the MBA is taught in English, some second-year modules are in Spanish. The school’s aim is to graduate students fluent in both languages. Ninety per cent of students pass the Spanish element and qualify for what is known as a bi-lingual MBA.
Students are advised to come to Barcelona to attend a summer language school before joining the programme. This makes them more employable, according to Javier Munoz, IESE’s admissions officer. The internships arranged through the business school demand fluency in Spanish; without considerable language skills the offers from Spanish banks, engineering firms and car manufacturers would not be forthcoming. Given the current economic situation in the country, they need all the advantages they can get.
As most of you have seen in recent days, world stock markets have been manic depressive, going through ups and mostly downs due in large part to widespread worries that the US debt downgrade from S&P and the fiscal debt in countries such as Greece, Italy, and Spain will result in worse market conditions for investors.
There was a market backlash against French debt and enormous market losses for French banks like Société Générale, BNP Paribas and Crédit Agricole (exposed to Greek debt and other European sovereign debt) that is making investors increasingly anxious about France’s debt. Indeed as The Economist writes:
“France’s debt stood at 82% of GDP last year, from 64% in 2007. This is one of the highest of any AAA-rated country. That, investors fear, means it could be the next target for a downgrade, especially if already anaemic economic growth falters further. The extra yield required by investors to hold French debt instead of German Bunds jumped to almost triple the average level of 2010 while the cost of insuring against a default by France reached new highs during the week.”
Moreover, as The Telegraph writes, “French banks have €410bn (£360bn) of exposure to Italy alone according to the Bank for International Settlements. The twin crises in France and Italy are now intimately linked and appear to be feeding on each other.”
How will France proceed? According to a great, in-depth Bloomberg interview (embedding not allowed) with Philippe D’Arvisenet, global chief economist at BNP Paribas SA, France initiating austerity measures is “inescapable”. They go on to discuss France’s exposure to European sovereign debt, reform plans to cut spending but keep tax rates at current levels (though with elimination of some 500 tax loopholes).
The same Telegraph article states, “French president Nicolas Sarkozy has ordered a “general mobilization” to slash France’s budget deficit in a frantic effort to safeguard the country’s AAA rating and head off a downgrade by Standard & Poor’s.”
We will see how this plays out…for now, the markets will likely continue to be manic depressive. Hang on tight!
I leave you with this passage from the Telegraph article:
“…Marchel Alexandrivich from Jefferies Fixed Income said investors are worried that the latest contagion to France could bring the eurozone’s bubbling problems to a head in a dramatic fashion.
“If France is dragged into the problem, then we will hit crisis point. They will either have to move to a full-blown eurobond — and German politicians are set against that — or face a break-up. There is a significant chance that the euro will no longer exist in its current form within twelve months,” he said.
President Sarkozy said France would include a “golden rule” in its constitution to restore fiscal probity, adding that the fiscal targets for 2011 and 2012 were “untouchable”.
The new budget measures will be introduced on August 24 and are expected to include the closure of 500 tax loopholes.
The IMF said France has the highest debt ratio of any AAA state this year at 85pc of GDP and may have to tighten further next year. Like the US, France has also built up huge pension debt and contingent liabilities.”
The Economist has an insightful commentary on both debt crises. Excerpt below.
Both the US and the European Union have public finances that are out of control and political systems that are too dysfunctional to fix the problem,” Mr Rachman writes. I have some quibbles about the way he frames the economic issues as a generalised problem of “an unsustainable and dangerous boom in credit”, viz homeowner credit in America and the overdrawn borrowing of Greece and Italy in Europe. This seems to smooth over a lot of differences a bit too easily; the American housing bubble was fueled by CDOs, but the economic problems in Europe aren’t about an asset bubble caused by Greek or Italian government borrowing, and to the extent that the problems are due not to asset bubbles but to financial interconnectedness, the interconnectedness caused by private-sector issuance of CDOs and CDSs isn’t really the same as the interconnectedness caused by the adoption of the euro across 17 countries.
This fantastic, rather long article by The Economist (April 20, 2011 print edition),“Reforming Gloomy France”, profiles the country’s current pessimistic mood, economy, prospects for growth and entrepreneurial start-up spirit that is motiving many today. It speaks about how the French state of mind is hard to pinpoint and also hope for the future. Excellent read. These are only excerpts below. You can read the full article at the link above, and I’ve made it available for download.
Reforming gloomy France
The French are feeling morose about their future. The thrusting energy of their digital entrepreneurs suggests they should not
Apr 20th 2011 | PARIS | from the print edition
BEHIND the bustling terrace cafés and bright municipal blooms of springtime, France today is not a happy place. Tense, fearful and beset by self-doubt, the French seem in a state of defiant hostility: towards their president, political parties, Islam, immigrants, the euro, globalisation, business bosses and more. Such is France’s despondency that its people face “burnout”, said the national ombudsman recently; previously, he had described the nation as “psychologically exhausted”.
It is a sign of French disgruntlement that the publishing sensation of the past six months has been “Indignez-vous!” (“Time for Outrage!”), a pamphlet by a 93-year-old urging his fellow countrymen to revolt. Indeed, the French currently rank among the world’s most pessimistic. Only 15% told a global poll that they expect things to get better in 2011, a far smaller percentage than of Germans or even Afghans and Iraqis (see chart 1)…
…The French seem simply to doubt their politicians’ ability to do much to improve anything. The economy is emerging only slowly from the recession, with GDP growth this year forecast to reach 1.7%, compared with 2.5% in Germany. Joblessness, at 9.6%, is high, and even more so for the under-25s. Although the government has embarked on fiscal consolidation, public finances remain under strain, with a deficit of 7.7% last year. Ordinary working people keep hearing that their high-tax, high-spending model provides them with one of the world’s most generous social systems; yet even the middle class feels a squeeze at the end of each month.
The upshot is a fatalistic France that seems to have set its sights on little better than controlled decline: a middling economic power, whose people cling to their social model and curse globalisation, while failing to get to grips with either. Considering what they hear from politicians, this attitude is perhaps not surprising. The Socialist Party promises, with a straight face, to restore retirement at 60 (the age was recently raised to 62) and urges greater European protectionism as a response to globalisation. Ms Le Pen vows to withdraw France from the euro and put back border controls. Mr Sarkozy’s political day-trip of choice is to a metal-bashing factory—although only 13% of jobs are in industry—where he surrounds himself with workers in overalls and hard hats, telling them they need to be protected from globalisation and other ills.
One conclusion from all this is that France and its politicians are irredeemably conservative. Indeed, France often seems to be in semi-permanent revolt, arms crossed and heels dug in against change. Only last autumn, unions and oil workers led weeks of strikes and blockades in protest at Mr Sarkozy’s modest raising of the minimum retirement age. On a single day, up to 3.5m protesters took to the streets; petrol pumps ran dry across the country. “Why France is impossible to reform”, lamented L’Express, a news-magazine….
…But if the French really are so allergic to change, how come the pension reform not only went through but has now been accepted, even forgotten? Only weeks after the new law reached the statute books in November, the matter did not rank among the nation’s top ten subjects of conversation, according to a poll for Paris-Match. France seemed to go through a painful spasm of rebellion, then to shrug it all off and resume business as usual. “We were able to demonstrate to the French people that there are things that a government just has to do,” argues Christine Lagarde, France’s finance minister. “For once, the government did not give in to the street.”…
…By holding firm, and ignoring charges of political deafness, Mr Sarkozy appealed over the heads of those on the streets to the silent majority. He took a bet that this invisible France would quietly back change, and prevail over the rest. For, in reality, two halves of the country co-exist. One half, mostly, but not only, in the public-sector, is led by hard-talking trade unionists promising to prolong benefits for privileged “insiders” and entrench rigid labour laws. The other half, mostly found in the more dynamic, private sector, is plugged into global markets and just as despairing of its strike-happy fellow countrymen as anybody else.
This is the France that does not go on strike, that defies disruptions to struggle into work, and whose voice is seldom heard. It is found among the 92% of workers who do not belong to a union. It is the small traders and artisans who are up before dawn scrubbing their shop-front windows. It is the workforce whose productivity per hour worked is higher than that in Germany and Britain, and which helped to make France the world’s third highest destination for foreign direct investment in 2010. It is the third of private-sector employees who work for a foreign firm. It is France’s leading global companies—Vivendi, L’Oréal, Michelin, LVMH—which busily reap the benefits of globalisation, a force that the French say they deplore.
This voiceless France, more adaptable and forward-looking, seldom permeates the national conversation. Yet a glance at the France behind the headlines hints at a picture that is a lot less glum. Shops are full, markets busy and consumer spending is buoyant. Property prices are up. The French have snapped up the iPad and 20m, or nearly a third of the population, are on Facebook. The French may moan about their country, their bureaucrats and their politicians, but they seem happy with their individual situation. Though only 17% of young people told one recent poll that their country’s future was promising, a massive 83% said that they were satisfied with their own lives.