I) France political economy :
Political system :
The government’s system is the semi presidential system. This kind of system has characteristics from both presidential and parliamentary system.The parliament is divided in two part: the National assembly and the Senate. The head of state is elected through direct elections for 5 years. France is republican and has a parliamentary democracy. The country is democratic and division of power is one characteristic of this democracy : Legislative, Executive and Judicial power.
Hofstede model :
According to the Hofstede Insight, France is more individualist than collectivist.
This shows that in the French society, individuals have their own convictions, decisions are taken individually then shown to the group and personal effort are for one’s.
Concerning political ideology, France is a modern and a pluralistic society. There are several political ideologies and a large variety of political parties. (Conservatives, republicans, radical party, centrist and many others.)
All citizens are equal in front of the law thanks to the the Declaration of the Rights of Man and of Citizens which is vigorously applied in all law texts. The application of this principle in verified by the constitutional council. Citizens are strongly protected by the law and they benefit protections for civil liberties and political rights as well.
The country is a secular republic (separation between religion and the state). There is no official religion, everyone is free to believe in one religion (or no) and to practice it freely.
France is also a country where freedom of thought, speech and press are free (Freedom house).
However, according to the freedom house, civil liberties rating have slightly declined due to controls on religious symbols ( Eg : Burkini which has been forbidden on several beach by municipal bans)
Economic system :
France is a mixed economy : A part of the economy is managed by the government and the other part is managed by private firms and individuals. Level of French government spending is relatively high : 52.8% contrary to UK : 47.3%.
The country is the world’s sixth largest economy right after USA, China, Japan, UK, Germany.
It is also the world’s seventh exporter of goods (WTO, 2016) and the 5th largest exporter of services (WTO, 2016)
Economic freedom :
Business freedom : The graph proves that it is relatively easy to open a business (license, cost , time to get construction permit), to operate it and to close it from all the government regulations.
Monetary freedom : Is free in France. It shows a relatively high price stability and not a lot of regulations on price. (Inflation in November- December 2017 : 1,19%) http://fr.inflation.eu/taux-de-inflation/france/inflation-historique/ipc-inflation-france-2017.aspx
Investment freedom in France is considered as mostly free with a rate of 70% in 2017.
Few restrictions on the flow of investment capital.Investment regulations are simple :
Market liberalization and foreign companies can easily establish their firm in France
Trade freedom in France is Free with a rate of 82 % in 2017 : Great level average of tariff rate/ No tariffs barriers with EU.
Tariff rate : 1.5%
The country is an open market and trade take a great part to the economy. (Imports and exports: 61% of GDP).
Main negative point : State-owned enterprise take a large place in the economy
Economy wealth :
– GDP : US $2,463 billion -World’s fifth largest economy.
France GDP has known a small increase of 0,4% during the last quarter of 2016.(World bank)
– Unemployment : 9,6 % (eurostat)
– Inflation : 0,1 (CPI)
-FDI inflows : $43 billion
Legal system :
Intellectual property right is secure and is regulated by the civil code. Laws (Code of intellectual property) are strongly established to protect businesses. In France, Patents protect invention, trademarks protect the unique name or symbol of businesses or products and copyright protects the original works of artists and software developers. Firms can register using INPI (central authority) to be protected. Also, attorneys are qualified in the intellectual property right sector.
Moreover, the Paris convention for the protection of industrial property shows how the country is implicated in the property’s protection.
The index of France’s safeness property rights is higher than the world’s average.
What about corruption ?
There is a strong legal framework that limit and fight corruption. Corruption is low in France and the law punish bribery.
The new Sapin 2 law will strengthen the anti-corruption fight since it has the target to bring the French legislation to the best European and international standard in terms of anti-corruption fight. Moreover the 435-3 law « incriminates the offer or promise of a bribe »
Consequently, if business plan to invest in France, corruption will be low risks for these businesses.
Regional economic integration :
France is part of the European union, which is the world’s biggest political and an economic alliance among 28 UE members.
Free trade market is “present” between all members, there are no barriers for the trade of goods, services and capital.
The union also share a common currency: the Euro €, a common monetary (Eurozone) and a fiscal policy.
Flow of people also have no barriers (as France is also part of the Schengen area).
France is well anchored inside EU as 70% of commercial exchanges are made with European partners.
The country has to respect EU regulations such as : trade treaties, import regulations, customs duties, agricultural agreements, import quotas..
The European union has an international and an economic influence, many metropolises concentrate headquarters of multinationals, a great work skills (scientific and technic). It also the 2nd world producer and is an outward economy (Rotterdam, 1 world’s harbor).
Other than that, the country has bilateral investment treaties with 96 countries.
There are some benefits in investing in a country that is part of the European union, such as:
? An open market: Market that can reach a bigger population.
? Free trade, no tariffs and a removal of customs costs.
Environmental issues :
Air pollution is one of the main issue in France. It is generally from industrial factories and vehicle emissions.
Water pollution is also a problem. With France the biggest agricultural producer in Europe, it is less to think that pesticides and fertilizers are not causing problems with water pollution.
Moreover, air pollution also causes acid rain damaging forest and plants.
Nuclear power is also part of the main issues as 75% of France energy is driven by nuclear power. This energy is not safe, costly and can cause radioactive waste that can be very dangerous.
However, the government is taking steps to reduce these issues.
Concerning air pollution, the new government has decided to completely ban diesel vehicle by 2040. Moreover, since January 2017, Paris and other big cities (Lyon, Lille, Strasbourg, Toulouse, Grenoble) have become restricted traffic zones and certain vehicle (usually the more polluting) are restricted to circulate in days when pollution rate increase.
Nuclear power is expected to be reduced to 50% by 2025 and the use of renewable energy will take a bigger part in the France energy production.
Finally, the government has released prospect to reduce by 50 % the use of phytosanitary product in France in 2025 according to the plan ecophyto. “Le label Terre Saine” has for objective to conduct as many communes as possible to adhere to a “no pesticide strategy”. Nowadays, sale of product as pesticides in shops are not done anymore in self-service and by 2019, chemical pesticides will be forbidden to individual.
Also, the country is known for its desire to protect the environment. The Paris Agreement is the first climate universal agreement and has as an objective to reduce greenhouse gas emissions in order to reduce global warming.
Ethics and sustainability :
Equality between men and women:
The government pays special attention regarding women access to employment, equality of wage, development of women entrepreneurship, mix of professions. These objectives are all part of the law 2014-873 for the equality between men and women.
Moreover, the labor code states that “all employers have to take into account objectives in terms of labor equality.” and to take steps to reach these objectives.
Penal sanctions are established in case of no respect of gender equality. It is written in the law that more than 50 employees’ enterprise will be submitted to pay a penalty when they have not established an agreement pertaining to the gender equality.
Wage gap between men and women decrease on a regular basis and between 2012 and 2013, this gap falls below 10 %.
Employment and work practices:
In France, a contract between the employer and the employee is made (number of work hours, wage, job title, length of paid leave …).
The firing process is under strict control as an employer cannot fire one employee at his will : The reason must be specific (and is written in the French case law).
Several main restrictions that employers are constraint to respect:
– For 35 hour working week, the minimum gross monthly wage is: 1480€ :
– Employees are given a minimum of five weeks’ paid holiday during the year.
– Employees should not work more than ten hours a day, 48 hours in a week.
Concern for health and safety:
« France is the 5th in the world for having healthcare infrastructure that matches the needs of society » (IMD, 2015).
Under the labor code respect, employers are required to take actions to prevent risk and unsafely working conditions (Information, training, adaptation to technical progress).
Health and safety instructions are given to employees. They state the use of work equipment, protective equipment, dangerous substances and all risks that they could possibly meet in their work.
Human right is a priority in France and is one value of the French republic. The protection of human right is part of the universal declaration of human right stating that every citizen is equal in front of the law. Everyone is strongly protected by the law.
The country has taken steps to achieve sustainable development goals extracted from “Agenda 2030”.
Actions are around five pillars:
-Planet: Clean water and sanitation, Clean energy, Sustainable cities, climate action, life below water and life on land.
-People: No poverty, zero hunger, quality education, gender equality, good health.
-Prosperity: Economic growth, reduced inequalities, innovation, responsible consumption and production.
-Peace: Peace, justice, strong institutions.
-Partnerships: partnerships for the goals.
In order to achieve these goals, the “Interministerial Delegate for Sustainable Development coordinate the actions to achieve them.”
France financing engagement for sustainability will increase to 4 billiards by 2020 (with 2 billiards for the global warming).
Foreign Direct Investment :
The 2017 A.T. Kearney Foreign Direct Investment Confidence Index shows that France is the 7th ranked FDI destination in the world. It has gained one rank since 2016.
France welcomes FDI since it can creates new jobs, increase new technologies
The country owns a great number of attractiveness and competitiveness:
Well located: Gateway through Europe, Africa and middle east.
A free economy: France is the world’s 7th country for cumulative FDI stock and 4th in Europe (UNCTAD, 2016). A large number of foreign business are run in France (More than 20 000)
1st in Europe: for FDI related to industry (385 manufacturing FDI)
Workforce: Competitive and qualified
High level of research and development: Ranked 1st for corporate tax rate on R
World’s leading sector: In aeronautics, wine, luxury goods, pharmaceutical.
French public spending : Highest in Europe
Ranked 7th : For hour labour productivity. In 2016, hourly labour cost (36,90€) were less than in Germany (38€) (Eurostat)
“In 2016, three-quarters of foreign investors thought France was an attractive location, up from one in two in 2009. (Business France)”
France business climate from november 2016 to november 2017:
France business climate has improved.
This indictor is from answers of business managers in sectors like manufactory industry, services, construction, retail and wholesale trade.
There are no limits on foreign companies and no restrictions to engage in a remunerative activity. However, certain sectors need an approval from the Economy and Finance ministry if the investment is related to public services (energy, transportation, water supplies)
-Immigration Policy: France is a country with open borders. The country is part of the Schengen space which authorize free movement of people. However, for those who are not part of EU or Schengen space immigration has become more restricted (eg : unskilled workers)
-Employment and labor are under many regulations and several laws (mainly extracted from French labour code). Employers need to take into consideration the minimum wage : €1,4480.27 which is relatively high and working time. French employees are represented by union section or union delegates who protect them.
Discrimination is prohibited and if any employees have been discriminated they can bring a claim to the labour court.
-Company taxation: France is known for high taxation.
The corporate income tax depends on revenues and on the capital structure.
Normal rate is 33,3% for taxable profit higher than 75 000 € and 28% for less than 75000€
(However, the new government has planned to reduce normal rate which will be 28% in 2020 for all companies.)
-The branch tax rate is 33% reducing to 28% in 2020
-Distribution tax rate : 3%
The country present several advantages that could potentially lead our company to invest in this country :
? A democratic and a individualist country.
? A strong legal systems that protect property rights and limit corruption
? A great economy freedom.
? An open market: Market that can reach a bigger population.
? Free trade, no tariffs and a removal of customs costs inside UE
? A country that welcomes and advocates FDI and that support international firms to invest in this country.
? A country with remarkable advantages and competitiveness.
? No restrictions for foreign investments
However, our company might be dissuade by the fact that :
? High taxes
? The country is a mixed economy : difficulty to enter the public market
? Rigid labor market
? Expensive working force