Exclusive interview France: More favourable as a Location
As a neighboring country, France is counted as the most important business market and investment location for German companies. Didier Boulogne, the Managing Director of Business France in Germany, Austria and Switzerland explains the current reasons for involvement and the factors making the location France favorable.
Mr. Boulogne, how is the current situation of French industry?
Even if the French industry is not as strong as that in Germany and though it is spoken about deindustrialization, it remains a major industrial land. E.g. France is ranked number two, just before Italy, if the value added of the industry is considered. Also in all industrial sectors, minimum one company from France is among the world-wide leading companies.
Which are the strengths, on which the French industry is based; what are the weaknesses?
The strengths of French industry are the large corporations. We have 30 industrial companies among the fortune-500, the same number as in Germany. On the contrary, large medium-sized companies with 500 to 5000 employees are lacking. The smaller companies must grow; this is the prerequisite to become successful in the world markets. These also support the government and institutions such as the development bank BPI France. The food processing industry belongs to the strong industrial sectors in France, which is based on the strong agricultural sector. Also the automobile industry plays a key role: Not may countries in the world have their own manufacturers; we have here two company groups. One out of ten workplaces in France depends on the automobile industry. The sector is now getting better than in the previous years; which the suppliers track. Also the pharma industry, biotechnology and aerospace are strong sectors.
How keen are the German companies to invest in France?
In the previous year, we have supported 141 German companies with their investment projects in France; this is a record. The projects are primarily used for the enhancement of existing subsidiaries; these are used very rarely for start-up. Primarily, it dealt with expansion of production; France is currently the European country, in which the companies mostly invest in production.
Which reasons are in favor of a commitment in France according to your observations from the perspective of German companies?
France offers a huge market with 66 million residents, the second largest in EU – with a positive demographic trend. This also has advantages in the labor market. We help the German companies in France, which suffer from shortage of skilled professionals to find a solution. A further advantage is the favorable infrastructure, whether telecommunication, fast internet, highways, trains or other transport options. Also, the energy costs are less for the companies. The attractive prices for electricity and gas are favorable for energy-intensive companies. Lastly, Paris is the city with the second largest concentration in Fortune-500-companies world-wide after Tokyo; however, just before New York or London. Such concentration is a strength as well as weakness for the country at the same time. Thus, Paris is a very favorable city for the companies; a place, where one must be present sooner or later.
Which experiences do the German investors gain from the French employees and their trade unions?
All German companies, which are relevant for us, praise the commitment of the employees in France. They are more willing than those in Germany. German companies also do not have any problems with the workforces in France, since there is respect and discussions from the end of the company manager. Continental was an exception here. Also the experiences of American or Korean companies in France are negative, since their responsibilities appear to be very different and very much self-contained than the Germans. The number of strikes has significantly decreased, in particular in the private sector; in the previous year, France had suffered less that Germany with respect to strikes in railways and aviation sectors. The situation in France had calmed down as compared to the previous years. Also the 35-hours week prescribed by law is not an obstacle in practice. Even if 35 hours are defined in the employment contracts as the working time, the employees work for 38.5 hours on an average per week; the managers work for 44 hours. Practically, all companies indulge into overtime; they must pay just an allowance of 25% to the employees for the same. However, I would like to suggest the following to the German companies, who want to locate in France: They need supporters, such as lawyers or tax consultants, who speak both the languages and know both the systems. This simplifies everything.
What are the general labor costs in France?
The government in Paris has done something for reduction in labor costs. With tax credits, we have lowered the labor costs by 6 % and thus below the German level. This tax credit is converted into tax reduction from 2017. Up to 2020, the rate of corporate income tax should be additionally lowered in a step-wise manner from 33 to 28 %. Lastly, there are also hundreds of measures for simplifying the administrative provisions in force; further implications at regular intervals of six months.
However, the economy demands further reforms by the policies.
We are aware that more reforms are necessary in France. Some have already been initiated. Now, we must wait until the effects of the reforms become apparent; this was the agenda in Germany in 2010. We have poorly declared certain reforms such as pension reform, since we have a joint responsibility, if this is perceived as reform deadlock in foreign country.
How can the German companies support the planned projects such as "Industrie du Futur" (the future industry)?
The platforms Industry 4.0 in Germany and Industrie du Futur in France are compatible. The participating companies can be a part of the projects and also receive government support for the same. This is also applicable for German subsidiary in France – the subsidiary is considered as French company as all others. With the platform Industrie du Futur, we want to explicitly bring in foreign Know-how and foreign technology.