France most successful in EU for foreign direct investment

Wed, Mar 30, 2011, 01:00

FOREIGN DIRECT investment (FDI) in France rose by 22 per cent last year, making it the most successful European country at attracting overseas companies.

In its annual report, published yesterday, France’s Agency for International Investment – the equivalent of IDA Ireland – found that France had received $57.4 billion in foreign investment in 2010.

That makes it the leading destination for FDI in the European Union, ahead of Belgium ($50.5 billion), Britain ($46.2 billion) and Germany ($34.4 billion).

France is the fourth most attractive destination globally for foreign investment, behind the US, China and Hong Kong.

The agency estimated that more than 30,000 jobs would be created or maintained in France by investments made in 2010. A total of 782 projects were confirmed, including six – accounting for just under 1,500 jobs – by Irish companies.

President Nicolas Sarkozy has said Ireland must raise its corporate tax rate from 12.5 per cent in exchange for a reduction in the interest rate on its bailout loans.

He accuses Ireland of “fiscal dumping”, or gaining unfair advantage, with a headline rate considerably lower than France’s 33.3 per cent.

However, Minister for Finance Michael Noonan has cited a recent study showing that France’s effective rate, when credits and incentives are taken into account, is 8.2 per cent, whereas Ireland’s is 11 per cent.

This was described by a senior Élysée Palace official as “totally false”, although it is cited in promotional literature published by the Agency for International Investment, a state body.

The annual report notes that France’s research credit, which covers 40 per cent of all research and developing spending in the first year of business, is “one of the most attractive incentive schemes in the world”.

“According to the OECD, France is the country with the most business-friendly tax treatment of RD,” it states.

“More than one-quarter of the companies aware of the existence of the research tax credit considered this measure to be a major factor in their decision to locate RD activities in France.”

The report cites a study by Ernst Young which showed that, in 2009, France received 16 per cent of foreign investment projects in the EU. Ireland attracted 3 per cent.

Welcoming the report’s findings, Mr Sarkozy pointed to recent reforms aimed at modernising the economy, strengthening competitiveness and stimulating innovation. “These reforms are bearing fruit,” he said.