France defies critics with foreign investment paradox

FP

While its rich decamp to lower tax neighbours and a government minister pulls the welcome mat from under the world's top steel tycoon, France is nevertheless taking a growing share of investment from undeterred foreigners.

That includes firms such as Chicago-based biotech Novian Health, lured to a technology park outside Paris by generous tax credits for research and development.

"For early-stage companies it's a really big plus because you can recoup a lot of your R&D expenses," Novian Health's Vice President Gene Bajorinas told Reuters. "It's an ideal scenario."

According to auditors Deloitte, France offers the most generous such incentives among OECD countries, with a tax credit worth 30 percent of companies' research and development spending below 100 million euros ($130 million) and 5 percent above that limit.

The rates are even higher for companies in the first two years they use the credits, and there are further advantages when research is carried out in partnership with public bodies.

That goes part way to explaining why $18.6 billion of foreign direct investment flowed into France in the second quarter, ranking it third among the 41 developed and emerging market countries tracked by the OECD, with only China and the United States attracting more.

FDI inflows so far this year stand at 42.5 billion euros as of October, better than the 29.5 billion euros seen in the whole of 2011. That puts France on course for the best year since a peak of 70 billion in 2007 just before the financial crisis broke, despite a reputation for high and rising taxes and over-protective labour laws.

Offsetting that reputation is an educated labour force, world-class infrastructure, cheap nuclear-powered electricity and relatively affordable land.

Such advantages have helped attract big groups such as Google, which has its headquarters for southern Europe in Paris, and Amazon, which opened a new logistics centre in June and has plans for another site.

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