"France: why the battle of attractiveness is far from lost":

Fontainebleau (France), Singapore and Abu Dhabi – 18 December 2013 – INSEAD, the leading international business school and sponsor and academic partner of the 8th Annual Etats de la France conference (State of France), unveiled the findings of a key competitiveness report. The document, developed by Bruno Lanvin, Executive Directorof the INSEAD European Competitiveness Initiative (IECI), and Javier Gimeno, INSEAD's Professor of Strategy and Academic Director of the IECI, revealed that the battle to boost France's market attractiveness is far from being lost. The report, titled France: why the battle of attractiveness is far from lost, is being revealed at the 2013 State of France conference whose theme is 'Between downturn and recovery: Priorities for boosting France's business attractiveness'. The conference constitutes an opportunity for experts from France and abroad, and numerous managers of businesses with foreign capital, to discuss four key aspects of France's attractiveness: the economy and "production"; taxation; innovation and research; and France's social policy and employment conditions. 

Jean-Paul Delevoye, Chairman of France's Economic, Social and Environmental Council (CESE), and Philippe Houzé, President of the INSEAD National Council-France, opened the conference. Discussions at the daylong summit brought together experts and leading observers (such as Agnès Bénassy-Quéré, Karine Berger, Jean-Claude Mailly), the French Minister responsible for Productive Recovery (Arnaud Montebourg), the head of the government's "Marque France" programme (Philippe Lentschener), and numerous business leaders. Louis Gallois, General Commissioner for investment, delivered the closing address.

The INSEAD report shows that France can, and indeed must, leverage its undeniable assets, notably in terms of innovation, to address its fiscal and social challenges. INSEAD thought leaders recommend that France overhaul its approach to collective action, notably by:

• Systematically striving to enhance the efficiency and effectiveness of public spending, to create the opportunity to reduce fiscal pressure;
• Relaxing the regulatory constraints and administrative procedures that restrict business competitiveness and flexibility, especially with regard to the labour market;
• Enhancing the effectiveness of France's innovation system, particularly by bolstering support for technology transfers and creating an environment that is more conducive to entrepreneurial risk-taking;
• Boosting France's capacity to attract key talents, by implementing a selective immigration policy and welcoming high-potential populations.

According to Bruno Lanvin, co-author of the study: ‘Globally, France still enjoys a surprising potential to attract business. The drop in investment and job creation by foreign companies are long-established trends that cannot solely be explained by recent fiscal policy. Our key concern now must be to enable France to offer foreign companies a more attractive return on France's taxes and regulatory constraints, which remain higher than average. In particular, France's attractiveness could be increased by specific efforts in the following priority areas: education, infrastructure, quality of life, dynamism and innovation, and talent management.’

The INSEAD faculty members point out that the increasing international mobility of factors of production is one of the most spectacular outcomes of globalisation. This means that the economic development of any one country now depends largely on its ability to attract talent and productive investment. Unfortunately, the report’s co-authors findings indicate that France seems to have grown less attractive in recent years, particularly when compared with the relatively decent economic situation at the turn of the century.

INSEAD's report explains how to regain this lost advantage. Recently, France has suffered a decline in its ability to attract foreign investment and talent. This change is both a result of the global economic crisis, which caused a general fall in investment, and also France's decreasing attractiveness for foreign investment. This drop in France's performance reflects a general deterioration in its attractiveness and competitiveness. For example, France fell from 15th position on the WEF Global Competitiveness Index in 2006, to 23rd place in 2013. The adverse effect of historical handicaps in terms of public governance, taxation and business environment has tended to increase.

According to Javier Gimeno, the report's co-author, the crisis hit France's competitiveness and productivity harder than the average across Europe. “There are important lessons to be learned from this,” says the INSEAD professor. “As we define our priorities for the future, France cannot rebuild its attractiveness independently of a Europe-wide strategy."

France is located at the heart of Europe, a region that has the largest and most innovative economy in the world (the Continent contains seven of the 10 most innovative countries listed on INSEAD's Global Innovation Index are European). France has valuable telecoms and transport infrastructure assets (respectively 4th and 8th in Europe, according to an INSEAD European Competitiveness Initiative survey), as well as a well-educated labour force. If it is to recover, the INSEAD experts say, France must directly address its current challenges and make a determined effort to become one of the world's most attractive countries once more.

The authors of INSEAD report explain how taxation constitutes one of the key causes of France's reduced attractiveness. High mandatory contributions, combined with the complexity and instability of France's fiscal legislation, have pushed France way down the international ranking tables. For example, INSEAD's latest European Competitiveness Survey places France in 25th position in this respect (out of 27 countries). France's future priorities must include reducing mandatory contributions, simplifying fiscal regulations, and striving to increase the efficiency and effectiveness of public spending, notably by focusing it on a more limited scope.

1. France's business environment remains too unfavourable: complex laws and regulations, cumbersome administrative procedures and an inflexible labour market are among the main handicaps cited by the business managers consulted as part of INSEAD's European Competitiveness Survey.
2. Until recently, France could still express pride in its education system. However, the latest international comparisons suggest that the quality of the system has eroded—and getting worse. Indeed, INSEAD's Global Talent Competitiveness Index 2013 places France in a modest 20th position. This uninspiring performance was confirmed by the findings of the OECD's PISA 2012 study, which reveals a decline in the performance of French secondary school students in science and mathematics compared with 2009.

Furthermore, France remains a relatively unattractive destination for foreign talent. This situation could be improved by simplifying immigration procedures for project initiators, according specific attention to foreign students who are likely to find employment easily in France, and headhunting high-potential talents more aggressively. The following initiatives, say the INSEAD experts, may help improve this situation: encouraging open-ended innovation networks; promoting the integration of PhDs and researchers into the corporate environment; increasing support for competitiveness hubs; using public tenders to structure offerings; increasing public investment bank resources; encouraging public-private partnerships and collaboration between businesses and universities; stepping up support to business angels; injecting seed capital into R&D sites and public teaching establishments; and implementing tax incentives to encourage risk-taking.

With its four strategic partners – Accenture, Adecco, HP and Siemens – the Etats de la France conference provides a snapshot of the current "State of France", in terms of its economy, social landscape, taxation and innovation. The annual summit aims to fuel discussions on the drivers to boost France's ability to attract foreign investment. Today, France's Economic, Social and Environmental Council (CESE) hosted the eighth Etats de la France conference. Leaders of numerous multinational companies that do business in France came together to discuss "Priorities for boosting France's business attractiveness". Founded by Denis Zervudacki, Chairman and CEO of D.Z.A., sponsored by INSEAD and supported by numerous large multinationals, the Etats de la France conference constitutes an annual think-tank that sifts and analyses trends and prospects for public decision-makers and managers of companies with foreign capital that do business in France.

To read the INSEAD report, click on : « Etude INSEAD 2013 « France : Pourquoi la bataille de l’attractivité est loin d’être perdue».

Please visit the website for further information on the Etats de la France conference: www.lesetatsdelafrance.com.