Foreign Direct Investment or better known by its initials FDI, is defined by Wikipedia as an investment in the form of controlling ownership in a company in one country by an entity based in another country.
France is one of the largest countries in Western Europe. In terms of economic power, it is ranked as the worlds ninth largest and the European Union’s (EU) second largest economy. France has a population of about 66 million people as at June 2016.
There are quite a lot of multinational companies that have made their headquarters in Paris. Some of them include L’Oreal, Louis Vuitton, Airbus and many more.
According to a United Nations Conference on Trade and Development (UNCTAD) report in 2016, France registered a FDI of USD43 billion in 2015 which was a more than two-fold increase from 2014 of USD15 billion. For the year 2016, FDI was estimated at USD46 billion.
Some of the reasons why France has managed to attract a high FDI are –
- High qualified manpower is available in France – Manpower force is better quality than other European country, in spite of the French being well known for its 35 hour week.
- Location – France is one of the major countries in the European Union (EU). It is bordered by Germany, Belgium, Luxembourg, Switzerland, Italy and Spain. France has an excellent location in Europe. This enables the country to easily trade with other countries in the EU and other parts of the world.
- Ease of doing business – According to a World Bank report, France ranked 29th out of 189 countries in terms of doing business. The French government is also striving to promote the country.
Some of the disadvantages of setting up a business in France are the high taxation rate, the high manpower costs and strict labor laws which tend to be sided with the employee rather than the employer.
Incentives given by the French Government
- Foreign companies are given the same government aid as French companies such as aid for research and development, professional training and others.
- The French government has also come up with a EUR 47 billion investment programmed called ‘Investments for the Future’ which is a ten year plan to assist in the development of green technologies, the digital industry and certain industrial sectors such as the space program, aeronautical etc.
- They have also introduced the Research Tax Credit which is tax incentives to increase growth in research and development particularly in areas such as pharmaceuticals, microelectronics, logistics and healthcare equipment.
- As France is known as a country with a high taxation rate, the French government has taken steps to reduce the tax rate from its current level of 33.33% to 28 % by the year 2020.
- Under an initiative which was launched in 2013 called Le French Tech, the government provides funding for new start-up and digital companies which is taken from the EUR47 billion ‘Investments for the Future’ fund.
- The French government has also simplified the business registration process. You can also register a business online.
Foreign Direct Investment Opportunity in France
Below are some of the opportunities that are open to FDI in France.
- Information Technology
The information technology industry actually covers a very wide selection of businesses within it such as software development, apps development for mobile smart phones and hardware. The French government is providing a lot of incentives in this industry such as Le French Tech, high investment in the infrastructure for telecommunications advancement and providing one of the world’s largest digital incubators. These incubators are normally for new start-up companies mainly in the IT industry.
With the excellent location of France in the heart of Europe and the good road infrastructure, it’s logical to either set up a logistics company or invest in an existing one in France. This industry has annual revenue of EUR 200 billion with over 1.8 million employees in more than 100,000 companies.
- Clean or Green Energy
France relies heavily on nuclear energy for its electricity generation. About 75% of its electricity is obtained from nuclear power. However the French government is trying to reduce this to about 50% by 2025. As such, there is an opportunity to introduce other forms of energy generation such as wind and solar or possible smaller forms of electricity generation such as bio gas or biomass.
France is the world’s sixth largest agricultural producer and the European Union’s leading country for agriculture. It recorded EUR170 billion in turnovers and has a workforce of 440,926 employees. France produces milk, beef, wine, cereals and many other types of food. As such the opportunities in this industry are tremendous. You can invest in a winery, a cattle or cow farm, a cereal producing factory and many more.
The biotechnology industry can be used in the agricultural and pharmaceutical industries. For the agricultural industry, biotech can be used to increase the yields of certain produce such as corn and sugar beets. For the pharmaceutical industry, biotech is used to basically make better medicine or better health supplements.
Biotech can also be used in the industrial sector where it’s used to produce industrially useful or environmentally friendly products such as the bio degradable plastic bags.
Other sectors worth mentioning are the aerospace industry, the chemical industry, the automotive industry and others. These types of industries normally would involve a very heavy investment.