Institute for Research in Economic and Fiscal issues

IREF Europe - Institute for Research in Economic and Fiscal issues

Fiscal competition
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The Truth About Foreign Investments in France

Are there as many foreign investments in France as Arnaud Montebourg claimed in his letter to Maurice Taylor? In his article, Lucas Léger, IREF researcher, analyzed statistical data and concluded that Montebourg was wrong. The truth is that, compared to the United Kingdom and Germany, France is no longer attractive.

Arnaud Montebourg hates private companies, especially foreign companies. In his letter to Maurice Taylor, the French minister made the difference between companies worthy of being set up in France and those that are not. Furthermore, Montebourg made a fool of himself giving unchecked data. He is doing nothing else than undermining long-term foreign investments which is bad for the French economy.

The Statistical Boosting of the IFA

In his letter to Maurice Taylor, Montebourg claimed that “each year, there are about 700 decisions of foreign investment location creating jobs and value in France.” This data is directly coming from the Invest in France Agency (IFA –Agence française pour les investissements internationaux in French) that aims at promoting France abroad. But these data are significant only when compared to European countries.

France is indeed the host land of foreign investments, just behind the United Kingdom as far as the number of projects in 2011. If, according to an Ernst & Young report, 70% of foreign investors are satisfied with France, 61% of those not yet set up do not wish to invest there. Far from improving, the situation is worsening as for the United Kingdom, Germany, the Netherlands or Belgium. France is not an exception since investors are distrustful of the Old Continent in general.

Moreover, when Montebourg talked about 700 companies, he included every kind of investments. For instance, the purchase of a Parisian building by a Qatari or a merger and acquisition between groups will be recorded as investment projects in France. But they create less jobs and are less productive than an R&D center. They should be withdrawn from the data. It was actually done by Ernst & Young and the FDI Intelligence in two different studies. The Ernst & Young study showed 540 investment projects in France in 2011, the FDI Intelligence reported 281 projects and the IFA as many as 698. The statistical boosting of the French public agencies in charge of foreign investments is obvious. France is actually far behind the United Kingdom (679 investment project for Ernst & Young, 896 for FDI Intelligence) even if the UK is keeping or creating twice as many jobs than France. As a result, in these studies, French data are worse since France is ranked 4th behind Russia, according to the FDI Intelligence study (see French article for comparative table).

Arnaud Montebourg was boasting that “France was proud to welcome more than 20.000 foreign companies creating 2 million jobs, one third of industrial exportations, 20% of the private R&D and 25% of industrial jobs.” But there are 55.000 foreign companies in Germany creating 3 million jobs. The Ernst & Young data show that each investment project created an average of 44 jobs in the United-Kingdom, 30 in Germany and 24 in France. Concerning R&D projects in France, Ernst& Young data are worrying since, despite of a unique research tax credit in Europe, R&D activities amount to 29 new projects only in 2011 against 45 in 2010. It is a real worry since innovation is a key factor to economic growth. The only good data is about the industrial sector, the best in Europe, with 170 investment projects in 2011.

Not Enough New Foreign Companies Setting Up

There are not enough new foreign companies setting up: only 40% of the investment projects for France are coming from new companies according to the FDI Intelligence data against 64% in the United Kingdom. The emerging countries (BRICS) are investing mainly in Germany and in the UK rather than in France and usually they bring new projects and create new jobs. France is not as attractive as it should be.

France should learn how to attract foreign investments again, and Arnaud Montebourg’s attitude is more than dangerous. It harms companies and jobs in France.

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