Foreign investment in France thrives despite gripes — for now

October 17, 2013

In France these days, every new industrial investment is welcomed with open arms, so when the Japanese machine-tools manufacturer Amada announced in mid-September that it was putting an additional $50 million into its existing production facilities, no fewer than two government ministers showed up for the signing ceremony. Much to their embarrassment, however, the chief executive officer of Amada, Mitsuo Okamoto, gave an interview that morning to a national French daily in which he castigated the national business climate, and said that if the company hadn’t already been in France for 40 years, “we would think twice about investing here for the first time.”

Chalk it up, one more time, to France’s investment paradox. Okamoto is just the latest example of a foreign CEO who moans and groans about the difficulties of doing business in France, even as he pours in money, in the form of fresh investment.

There’s certainly a lot to complain about. The law reducing the official workweek to 35 hours, passed in 2000, is still on the books. The outsized labor code that governs hiring, firing and everything in between is regularly cited by organizations from the World Bank to the World Economic Forum as a significant impediment to doing business; its printed version runs to 3,371 pages, or more than three times the size of the German equivalent. Unions are famously feisty, and labor costs, already high, have continued to rise at a faster rate than productivity, even after the 2007-08 financial crisis.

Yet France — at least until now — has weathered the criticism with panache. For years, it has enjoyed a flood of direct investment that has made it a regular fixture near the top of the list of recipient nations in the world, alongside the U.S., China and the UK. According to estimates by the United Nations Conference on Trade and Development, France received $59 billion in incoming investment in 2012, far ahead of larger nations such as Australia or Russia, and just behind Britain and Brazil. According to the government’s Invest in France Agency, whose job is to woo potential foreign investors, there were almost 700 new investment projects in 2012, which together created or safeguarded about 26,000 jobs.

But 17 months after the election of Socialist President François Hollande, there are some signs that this French paradox is now being sorely tested. The most startling is a survey by consultants Bain and Co. for the American Chamber of Commerce in France, released this week, that shows an utter collapse in U.S. corporate sentiment about France as a place to invest.

Executives from the French subsidiaries of U.S. companies were asked about how their bosses at corporate headquarters viewed France. Slightly fewer than 13 percent said the perception was positive, a dramatic drop from the 56 percent positive rating of just two years ago, before Hollande was elected. It followed a sharp drop in 2012, when only 22 percent gave a favorable rating.

The euro zone crisis and France’s sluggish economic prospects are part of the problem; only 10 percent of those polled saw the overall economy improving this year, and 60 percent foresaw a decline in their sector of activity.

But the biggest factors explaining the disastrous poll results are political; the U.S. firms said they couldn’t understand the direction of the government’s economic policy, and that recent decisions on fiscal policy and labor laws simply made France’s already complex legislation even more burdensome and opaque.

Chief among the gripes was the announcement by Hollande himself during his presidential campaign that people earning more than one million euros per year would be hit with a new 75 percent marginal income tax rate. The government has since had to tone down the measure after its constitutionality was put into question; the 75 percent tax band still applies, but now companies can pay it for their executives. The American Chamber of Commerce survey included anonymous quotes from some senior executives, including the finance director of a hotel company who complained that “monumental communication errors were made about the measures taken, including the 75 percent tax.”

Investment bankers separately report that some international investors have been scared off by the aggressive rhetoric of some government ministers, especially Arnaud Montebourg, the Minister for Productive Renewal, in charge of industry, who has been involved in several ill-tempered clashes with foreign business executives, including the UK-based steel magnate Lakshmi Mittal, and Maurice Taylor, the CEO of U.S. tire maker Titan International, who complained that, “the French workforce gets paid high wages but works only three hours.”

It’s not just foreigners who are complaining. The newly elected head of MEDEF, the French Employers’ Association, Pierre Gattaz, has been on the offensive, chastising the government for its high taxes and urging massive cuts in public spending in order to create jobs.

It’s still too early to know whether the French investment paradox will remain in place, ensuring that, despite the complaints, the foreign investment will hold up. The first reliable statistics for this year are due to be collated in January. Government officials concede that some projects were put on hold already before the election, and that in general, since the financial crisis, the trend has been for investments to shrink in size, if not in number. Still, some significant new investments have been announced over the past 12 months, including the opening of a big new Amazon distribution center that is slated to employ 2,500 people by 2015, and an investment by Coca-Cola in a new recycled bottle plant. But in the American Chamber of Commerce survey, 26 percent of the U.S. companies polled predicted they would reduce their French staffing levels in 2014-15, whereas only 19 percent foresaw an increase.

What U.S. business thinks is critically important for France, as American companies are the single largest foreign investors in the nation, accounting for almost one quarter of the total. Germany, Italy, Switzerland and the UK follow, at some distance, and then comes Japan. Okamoto, the Amada CEO who threw a bomb at French protocol when he came out with his blunt comments, was probably speaking for all foreign investors when he ended his interview with a plea: “France needs to think about the question of its workweek.” So far, there’s no sign of that happening under the Hollande administration.

PHOTO: ArcelorMittal steel workers dressed in protective work suits demonstrate over pension reforms in Marseille, October 15, 2013.  REUTERS/Jean-Paul Pelissier



We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see

A one sided opinion piece – foreign investment is only a small part of the world we live in. France seems to be currently favoring the equality part of liberty-equality-fraternity at the moment. The US on the other hand is right in the middle of the an inequality pandemic which is getting worse. No wonder the two can’t see eye to eye – the Americans demand docile slaves while the French treasure their liberty above the slave wages on offer.

Posted by BidnisMan | Report as abusive

We need more countries to follow France’s example, and begin the pushback against corporations’ collective deathgrip. BidnisMan is absolutely right – corporations continue their campaign of converting the US’s 99% into serfs, and will do the same to other countries if left unchecked.

Posted by brianpforbes | Report as abusive

France remains the global leader of the social progress.
It is simple to downgrade the country to the Guilded Age.
What is hard: to look out into the future.
What’s done in France; what is being done in France – is the way where the human society is supposed to go.
Yes, these are hard times.
However, taking the austerity course leads to nowhere.
France rocks!

Posted by OUTPOST2012.NET | Report as abusive

Well said @BidnisMan, @brianforbes, @OUTPOST2012!

It seems to me that a 20% protective tariff is the only beneficial way to preserve the French people, or the American people.

Here is why.

The evolution of biological life on Earth is along a line of increasing biological organization, shaped by a struggle for survival.

Social organization — whether in a bee hive, ant bed, or human city — is simply a higher level of that same biological organization.

In human social evolution, which is now clearly accelerating exponentially, the multinational corporation, upon the removal of trade tariffs, has become the most rapidly evolving super-organism on Earth.

Unfortunately for employees, the multinational corporation that evolves most quickly and most efficiently is one where capital is husbanded and workers are usable/disposable.

Yes, it is a biological fact of life that in Earth’s new highest super-organism, the multi-national corporation, capital (profit for owners) must be husbanded above all, if it is to survive in the brutal, unforgiving struggle that is business.

That means capital (profit for owners) must be husbanded above everything — above workers, above notions of fairness, above notions of patriotism, above notions of legality, above notions of empathy.

This amazing new species, the internet-empowered multinational corporation, broken loose from its former chains of protective tariffs, is truly a spectacle to watch as it evolves so quickly, by the day, by the hour.

Today is October 20, 2013, and it has evolved further in the past hour, all over the world.

What will it look like a month from now, this dazzling species, the internet powered multi-national corporation? What? Is it sprouting feathers now? Or are those perhaps little new-forming claws of some kind? Or maybe some kind of tentacle?

We are all in for quite a ride! Hold on tightly.

Posted by AdamSmith | Report as abusive

Clearly the above commenters have never LIVED in France. Foreign investement doesn’t mean much – c’mon, what’s $59B in a $3.5T economy? That it gets so much press is American press push from an American think tank. BUT the French economic situation is really awful. Unemployment is extremely high, as is govt dependence. Most people have ZERO job security and instead get very short term contracts for 28hrs per week (so as to game benefit and tax codes). That Hollande has been driving the country to beggary with big talk and little action is no surprise, and his election was a direct protest to Sarkozy the man, not Sarkozy the president.

Posted by CDN_Rebel | Report as abusive

France has the same problem America has: All the items on the store shelves in France say “Made somewhere else”.

THE QUESTION: How can France keep its workers employed when everything consumed there is made somewhere else?

To this crucial question, the wealthy class and the corporate-plutocrat-globalist responds with “Errr”, or “Ummm,” or with “Don’t worry, it will all work out in the end!”

This current globalist-induced situation is preposterous. Any reasonable person can see that the people of France fared much, much better when the country protected its manufacturing base with a strong protective tariff.

Do the workers of France want to receive the same hourly pay as the workers of China, India and Mexico? That is where globalism (removal of protective tariffs) takes you. The great leveling, where the people of India (population 1.17 Billion) and the people of France will receive the same pay rate. That means the Indian worker must see his pay rate go up and the French worker must see his pay rate go down, down and more down.

The ONLY solution is to bring back the French PROTECTIVE TARIFF, and to place the names of the wealthy globalist-corporate types currently preying on the French people by carrying out vast lobbying campaigns in support of globalism, in a list for criminal indictment.

France can only be saved by a 20% protective tariff on all imported goods. This will immediately cause new French manufacturing companies to spring up like grass after a rain.

Posted by AdamSmith | Report as abusive

Adam Smith – nicely stated, a very concise summary of where we stand. I just don’t see where all of this ends; the people of the developed world are being further crushed by the day, but there is no revolution, even as world governments continue to position themselves more closely with global corporations.

Posted by brianpforbes | Report as abusive