Investment Opportunities in France

Head Table Guests

Leland Ausman, former Canadian Foreign Service Officer and an Honorary Director, The Empire Club of Canada; David Common, grade 13 student, Jarvis Collegiate Institute; Alain Nourrissier, Head, Economics and Commercial Department, French Embassy, Ottawa; Helen Vari, President, George and Helen Vari Foundation; Fred Kossein, General Manager, Bramalea Office, Canadian Liquid Air Ltd., and a member of the Board, French Chamber of Commerce in Canada; Yves Doutriaux, Consul General of France; Thomas Wells, former Ontario Agent General to the United Kingdom and a Director, The Empire Club of Canada; Father Pierre-Jean Courtot, Pastor, Eglise Sacre-Coeur; Helen Roman-Barber, Chairman and CEO, Roman Corporation Limited; Michel Finance, President, French Chamber of Commerce in Canada and Vice-President of Finance, Connaught Laboratories Limited.

Introduction by Dr. Jackman

Ladies and gentlemen, today's address by Ambassador Tordjman marks the first of our fall speeches. To make this possible, the French Chamber of Commerce in Canada has done much and we appreciate these contributions.

Your being first, Mr. Ambassador, and from France is reminiscent of another Frenchman known to all young students in Canada. Three hundred and ninety years ago, Samuel de Champlain paddled our lakes and rivers in search of trade and investment opportunities. One might even say, with some stretch of the imagination, that he even laid the seeds for the future French Chamber of Commerce. The opportunities he saw helped create the conditions of your being here today.

Ladies and gentlemen, our guest speaker has had a distinguished diplomatic career. Twice posted to the U.S., he most recently served in Washington as Minister for Economic and Commercial Affairs (1985-1992).

He has served the French Government as Deputy Secretary of Commerce, Small Business and Tourism. Furthermore, at the Ministry for Foreign Trade he was in charge of the European Economic Commission and Japanese trade relations.

In the old days, Champlain brought the good word about Canada back to France. Well, today the investment climate in France has changed for the better. The return on investment in France is among the highest in the world. You, Mr. Ambassador, are about to bring the good word back to Canada. You will tell us about a friendly new climate for business in France.

One more note on Champlain, he too came to Toronto. "Toronto" is not an English or a French word. It is an old Huron Indian word meaning "meeting place." Well, we are pleased to meet you here and we look forward to hearing why Tordjman's France is a better place to invest than Champlain's Canada.

Jean-Daniel Tordjman

It is a great pleasure to be in Toronto, and I am most honoured to be the guest of The Empire Club of Canada and of the French Chamber of Commerce. I am here to speak about France--what is going on in Europe, what are the prospects for the investor in industry and finance, how we see the outcome of the economic situation and what we can expect in the development of partnerships between firms of our two countries.

What is the outlook for International Direct Investment (IDI)?

There was considerable growth of International Direct Investment ODD in the 1980s. It surged in the latter half of the decade, largely as a result of the international expansion policies of Japanese and European companies. The world stock of IDI rose from $678 billion in 1985 to $1.6 trillion in 1991.

International Direct Investment by companies from the five leading industrialized countries--the United States, Japan, Germany, France and the United Kingdom accounts for most of this. The United States was the main beneficiary of IDI capital flows during most of the decade. However, the rate of foreign direct investment in the United States declined in 1990 and 1991.

The early nineties witnessed a marked overall decrease in cross-border investments. The decline reflected the impact that the recession in the Anglo-Saxon countries, the slowdown of economic activity in Japan and the weaker earnings performance of multinational corporations had on international investment strategies. Nonetheless, it is expected that the pace of international investment will increase significantly during the rest of the decade. IDI expansion will also be favoured by the progressive removal of barriers, especially in the service industries, and by the creation of large regional economic markets.

Europe and Asia are likely to be the main beneficiaries of these new investment flows. This trend was already manifest in the latter part of the eighties as investors sought to place themselves in the European market. The EC countries hosted 38 per cent of the world inward investment in 1991.

In 1991, IDI grew at a faster rate in France than in any other G5 country according to a recent study of the U.S. Department of Commerce. In 1992, France was the first host country of international direct investment, on a par with the United Kingdom.

What is the present trend for Foreign Direct Investment (FDI) in France?

France has proven to be particularly accessible to foreign investors. In fact, France has become one of Europe's most attractive areas for FDI. Hence the rapid growth of FIN in France, notably in the manufacturing and financial services sectors. The OECD ranked France third--behind the United States and the United Kingdom--among the leading industrial countries for trans-national investment from 1981 to 1989. French FDI inflows tripled since 1987.

The mid-eighties were characterized by the internationalization of French companies which began investing massively abroad, primarily in the United States. From 1985 to 1991, French companies invested $100 billion abroad whereas foreign companies made $50 billion of direct investments in France during the same time frame.

Foreign investment in France reached record levels in 1992. Foreign direct investment (FDI) totalled French Francs 86.4 billion, up 38 per cent from the previous record 1991 inflows (FF 62.5 billion). Last year's performance puts France at the top of the league of FDI host countries. France was the first host country for international direct investment in 1992, on a par with the United Kingdom.

Based on provisional 1992 data, it appears that European Community countries remained the main source of foreign investment in France as well as the main hosts of French FDI outflows. It should be noted however that the hierarchy of investor nations changed: Due to two important transactions, Italy tripled its 1991 results and became the principal foreign investor in France in 1992. Inflows from the United States increased substantially, from FF 5.6 billion in 1991 to FF 14.5 billion in 1992.

What characterizes foreign investment in France? The United States is the main foreign investor in France, followed by Germany and the United Kingdom. Taken together, European investors control the largest share of foreign-owned assets, followed by the United States. Japanese investment has grown steadily over the past years.

Foreign presence is particularly strong in the manufacturing sector, notably in the food, processing, electronics and chemical sectors. Foreign-owned corporations accounted for 29 per cent of France's industrial production in 1991 and employed 24 per cent of its industrial work force. These corporations also account for 32 per cent of French industrial exports and 27 per cent of investment in the manufacturing sector. Foreign-owned corporations are typically middle-sized companies with 200 to 1,000 employees. These mid-sized companies account for over 40 per cent of manufacturing jobs created by foreign-owned corporations.

These attractive features have led more than 4,000 foreign manufacturers to establish themselves in France. There are over 8,000 foreign-owned companies in the greater Paris area; 417 foreign-owned companies have research and development facilities in France. Most of the world's best known companies are present in the French market.

Major U.S. investors include General Motors, IBM, Procter & Gamble, Kodak, General Foods, NCR and Hewlett Packard, to name but a few. Among others, European investors include Bayer and Bertelsmann from Germany, Guinness and General Electric from the U.K., Volvo and Scanis from Sweden, Ciba-Geigy and Nestle from Switzerland and Unilever from the Netherlands. Japanese Investors include Sony, Canon, Sumifomo, Yamaha, Toshiba, Hitachi, Akai and Mitsubishi. The South Korean group Deawoo has also established itself in France.

What advantages does France offer to foreign investors?

France, the world's fourth-largest economy, has a great deal to offer international investors.

As the British magazine Euromoney noted in its special September issue, these features make France "one of the most attractive countries in Europe for international investment." According to their study which used a number of criteria including costs, market conditions, and the overall business environment, France is a more attractive host country for international investment than Germany, the United Kingdom or Switzerland. France was ranked first for the quality of its infrastructure, second for its overall economic environment, and second as far as financial and political risk is concerned.

In the course of the past eight years, taxes on corporate profits have declined from 50 per cent to 33 per cent, one of the lowest rates in the European Community.

Investors can rely upon a productive labour force, a stable and healthy social climate and low labour costs. French labour costs are significantly lower than those of Germany, for example, French productivity is the second-highest in the world, after the United States. The number of hours lost to labour disputes in 1990 was the lowest since 1946.

Investors can also count upon France's remarkable choice of sites, world-class transport and telecommunications, reliable and low-cost energy, dynamic and innovative financial markets, a modern and diversified industrial base and world-class research and development facilities.

France is the world's fourth-largest exporter, the fourth-largest importer, the second exporter of agricultural products, the second exporter of services, and the first host country for foreign visitors. Sixty million tourists visited France in 1992.

What is the Strategy of the Invest in France Mission? The Invest in France Mission has a broad mandate which involves analysis, estimates and proposals, interagency co-ordination and canvassing of international markets. The Mission's main areas of action are the following:

• The Invest in France Mission canvasses international decision-makers and investors in North America, Western Europe, Asia and the Middle East.
• The Invest in France Mission provides investors with a central interlocutor for projects requiring interdepartmental co-ordination.
• The Invest in France Mission provides assistance to foreign investors already present in the French market.
• The Invest in France Mission improves the regulatory environment for international investors. The interdepartmental character of the Mission makes it possible to provide concrete assistance in the regulatory and tax domain.
• Communications and public relations. The Invest in France Mission promotes the image of the strength of French economic life worldwide.

Let me conclude by telling you that we welcome Canadian investments in France, such as McCain, Bombardier, Northern Telecom but we also welcome the development of strategic alliances by French and Canadian firms, Alsthom with Bombardier, Aerospatiale with Bombardier, EDF with Norsd Hydro and many others.

We want to do business with you, we want to do more with Canadians and I hope we will work a lot together.