The invitation to foreign capital is out; Funds shift but welcome stays

By , Business and financial editor of The Christian Science Monitor

The movement of investment across the Atlantic between France and the United States is no longer such a one-way flow. Money is now heading west in a strong stream.

An official here estimated that French investment in the US last year ran about $300 million, bringing total French investment in plant and equipment in the United States to about $2 billion.

"French foreign investment is going up rather quickly," he said. With the decline of the dollar in terms of francs, French businessmen are taking advantage of the relatively good value of American firms. The French government quietly welcomes the trend, regarding French investment as an excellent way for also ultimating exports.

Recommended: France presidential elections: the candidates challenging Sarkozy

However, US investment in France amounts to at least three times as much. And despite the occasional exercise of considerable French nationalism over some US firm, particularly in such sensitive areas as computers or communications, the French are keen for more foreign investments.

One of the early moves of former French Prime Minister Georges Pompidou (later President) after taking office was to create in 1963 an agency to encourage foreign investment in regions outside the Paris area, particularly those with high unemployment. Mr. Pompidou figured foreign firms would open the minds of French businessmen, making them more international and modern in their thinking.

That organization, the Delegation for Territorial Organization & Regional Action (DATAR), claims some success. Jacques Waline, director of foreign investment, says the agency attracted less than 6,000 jobs to france in 1976 through foreign investment, 8,200 in 1977, 12,000 in 1978, and somewhere between 11,000 and 12,000 last year.

"The trend is good," he says.

By now, foreign investment accounts for 17 percent of the book value of manufacturing in France, 23 percent of wages paid in industry, and jobs for some 800,000 workers in a total labor force in manufacturing of 3.91 million. The US accounts for around 43 percent of that foreign investment and 35,000 of a total of 80,000 new jobs encouraged by DATAR.

The competition among West European nations for foreign investment has become intensive. Most large multinational firms already have operations somewhere in Europe. So the battle is mostly of expansion plants or the investments of smaller or middle-scale firms.

Ireland probably has the most generous financial incentives for foreign investment of any European country. But France figures that its central location in West Europe, its large market, and high technological capabilities are highly attractive.

Investment incentives are decided on a case-by-case basis, noted Mr. Waline. The agency especially welcomes joint vetures, new technology, or research and development facilities. Cash grants and subsidies can go as high as 25 percent of the investment. Government three-to-five-year, low-interest loans or guarantees can cover as much as another 25 percent. Long-term loans are sometimes offered at a generous 9 percent interest rate. Further, the government provides subsidies to cover as much as 40 or 60 percent of the cost of wages, teachers' salaries, and travel expenses for training workers.

These incentives are primarily aimed at steering a firm into the desired area of France, once France has been chosen, maintained Mr. Waline. The goal of decentralization of industry outside of the Paris region shows mixed success, depending on the area.

In offices in New York, Chicago, and Los Angeles, DATAR goes under the name French Industrial Development Agency.

Share this story:

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...