ACADEMY OF ECONOMIC STUDIES OF MOLDOVA

FACULTY OF INTERNATIONAL ECONOMIC RELATIONS

DEPARTMENT OF INTERNATIONAL ECONOMIC RELATIONS

FRENCH BUSINESS ENVIRONMENT

AUTHORS: PROFESSOR:

1) DUMBRAVA TATIANA 1) ZORINA SISCAN

2) JUNCU EUGEN
3) ANDREI SACULTAN

CONTENTS

INTRODUCTION.3
CHAPTER 1: THE ANALYSES OF GENERAL ECONOMY OF

FRANCE4

1.1 GDP EVOLUTION...4

1.2 THE BUSINESS OF TRADE . 5
1.3 UNEMPLOYMENT RATE..7

1.4 INFLATION RATE ,,9

CHAPTER 2: ANALYSES OF BUSINESS

CLIMATE..10

2.1 DOING BUSINESS...

11

2.2 IVESTMENT CLIMATE..

12

2.3 FOREIGN DIRECT INVESTMENT

..13

2.4 French Culture Key Concepts and Values14

CONCLUSION.1

BIBLIOGRAPHY.1

2
 INTRODUCTION

This project is seeking to develop and inform us about a new France International Business
Envirenment. The information provided in the next chapters allows us to understand what seem
to be the most important problems of France and what would be the best possibility that will help
to implement them. The most important objective is to observe the overall economic
development during the past decade as well as observing the issues and gaps which stops the
successful partnership.
France is one of the most modern and highly-developed countries in the world, with one of the
largest economies, and is a leader among European nations. While France continues to be proud
of its rich history and independence, French leaders are increasingly seeking to tie the future of
France to the continued development of the European Union.
France has a surface area of over 550,000 km2 (215,000 miles2), including overseas territories.
This makes it the largest country in Western Europe. Due to its overseas departments and
territories scattered worldwide, France possesses one of the largest Exclusive Economic Zones
(EEZ) in the world, covering over 11,035,000 km2 (4,260,000 miles2).
Influenced by an amalgamation of cultural and historical differences. As the largest Western
European country, France is a nation that takes immense pride in its history and prominent
culture. Such cultural identities play a crucial role in French business culture, where appropriate
conduct, mutual trust and understanding are the key to your organisations success.

3
CHAPTER 1 THE ANALYSES OF GENERAL ECONOMY OF FRANCE

1.1 GDP EVOLUTION

The gross domestic product is one of the primary indicators used to gauge the health of a
country's economy. It represents the total dollar value of all goods and services produced over a
specific time period; you can think of it as the size of the economy

Graph 1. France GDP Annual Growth Rate

Source: http://www.tradingeconomics.com/france/gdp-growth-annual

France is the seventh largest economy in the world and the second largest in the Euro Area.
France has a large and diversified industrial and agricultural base which includes aircraft,
military equipment, perfumes, pharmaceuticals, wine, beef and wheat production. With at least
82 million foreign tourists per year, France is the most visited country in the world and maintains
the third largest income in the world from tourism. Services are the biggest sector of the
economy (79 percent of total GDP) while industry accounts for 19 percent. Agriculture
contributes 2 percent to GDP, yet France is the second largest exporter of agricultural products in
the world. This page provides the latest reported value for - France GDP Annual Growth Rate -
plus previous releases, historical high and low, short-term forecast and long-term prediction,

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economic calendar, survey consensus and news. France GDP Annual Growth Rate - actual data,
historical chart and calendar of releases - was last updated on February of 2017.

1.2 THE BUSINESS OF TRADE

Conducting trade across borders is becoming increasingly important for business.
Inefficiencies in documentation requirements, port operations, infrastructure and burdensome
custom procedures all lead to extra costs and delays for both importers and exports. From a
global perspective, France ranks 36th out of 189 economies on the ease of trading across
borders, according to the World Bank. According to the World Bank (Doing Business in
France) on average, it takes 11 days to execute the procedures required, once goods arrive for
import into France. Since 2010, this number has been unchanged, however, France is falling
behind the regional OECD average which has been in steady decline, and currently sits at 10
days (for 2013). France requires only two documents upon import, and the cost per import
container was US$1,445 in 2013. In a comparative of surrounding geographies, the time
required to import into France indicates long delays, when compared to Belgium (8 days),
Germany (7), Spain (9), Switzerland (8), and the U.K. (6). The container cost across these
countries shows France charges the most, however, the documentation process for the
country is the lowest of those in the comparable economies. In 2009, France simplified
customs clearance procedures, by implementing electronic custom declarations and removing
the need for other documents. In a breakdown of the procedures to import to France, it takes
5 days for documents to be prepared (US$300); custom clearance and technical control
require 1 day and cost US$150; three days are needed to cover the port and terminal handling
(US$315), and two days to allow inland transportation and handling (US$680). Commercial
disputes can be a concern for many importers and knowing a countrys ability to resolve
these disputes through courts is important when selecting an export market. In this regard,
France ranks very well at seven out of 189 economies world-wide placing it well below the
regional OECD average for 2013. According to the World Bank, contract enforcement takes
395 days, costs 17.4% of the value of the claim and requires 29 procedures. The OECD
average for the E.U. is 529 days, costs 21% of the value of the claim, and requires 31
procedures.

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 Imports to France rose 1.4 percent month-over-month to 43845 EUR
Million in December of 2016. Purchases increased for aerospace industry
products (14.3 percent), perfumes, cosmetics, cleaning products (0.4
percent), automotive products (0.8 percent), pharmaceuticals (1.7 percent),
metallurgical and metal products (3.0 percent), refined oil (19.3 percent) and
agricultural products (9.8 percent). In contrast, imports declined for: natural
hydrocarbons (-5.1 percent), chemicals (-2.0 percent), industrial &
agricultural machinery (-1.1 percent), electrical & household equipment (-0.2
percent); works of arts, technical documentation, publishing products (-5.0
percent); wood, paper, cardboard (-0.5 percent); textiles, leather (-0.1
percent); jewelry, toys, furniture (-1.7 percent); rubber products, plastics ,
various minerals (-1.5 percent) and ships, trains, bikes (-2.1 percent). Imports
in France averaged 19533.32 EUR Million from 1970 until 2016, reaching an
all time high of 44459 EUR Million in August of 2012 and a record low of
1151.90 EUR Million in May of 1970.

Graph 2. Evolution of Imports

Source:www.trandingseconomics.com

Exports from France increased 4 percent month-over-month to 40424 EUR Million in December
of 2016. Sales went up for: aerospace industry products (37.7 percent), chemicals (1.3 percent),
industrial & agriculture machinery (0.1 percent), electrical and household equipment (0.9

6
percent), automotive products (0.1 percent), metallurgical and metal products (0.2 percent) and
refined oil (23.3 percent). Exports were higher to Asia (37.8 percent), the Middle-East countries
(41.8 percent), the European countries outside EU (8.5 percent) and Africa (4.6 percent). In
contrast, sales declined to America (-5.2 percent) and the EU countries (-1.3 percent). Exports in
France averaged 18440.01 EUR Million from 1970 until 2016, reaching an all time high of
40424 EUR Million in December of 2016 and a record low of 1165.60 EUR Million in May of
1970.

Graph 3. Evolution of Imports

1.3 UNEMPLYOMENT RATE

Unemployment rate in France fell slightly to 10.0 percent in the three months
to December of 2016, compared to an upwardly revised 10.1 percent in the
September quarter while market expected 9.7 percent. In the December
quarter, the employment rate of the population aged 15-64 years stood at
64.7 percent, up 0.1 percentage points compared to the third quarter.
Unemployment Rate in France averaged 9.27 percent from 1996 until 2016,
reaching an all time high of 10.70 percent in the first quarter of 1997 and a
record low of 7.20 percent in the first quarter of 2008.

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Graph 4: Evolution of Unemployment Rate
Source: https://www.theguardian.com/world/2016/aug/18/french-unemployment-rate-falls-first-
time-2012-francois-hollande
Frances unemployment rate has fallen below 10% for the first time since 2012, offering a boost
to Franois Hollande, who staked his political future on creating more jobs.
The French statistics body Insee said unemployment on mainland France and its overseas
territories fell to 9.9% in the second quarter, from 10.2% in the previous three months.
It was the lowest level since the third quarter of 2012, just after Hollande took office. The
president said he would not stand for re-election in 2017 unless there was a sustained fall in
unemployment this year. However, Hollandes poor poll ratings indicate that the presidential
election will be a contest between the centre-right politician and current favourite, Alain Jupp,
and the far-right Front National leader, Marine Le Pen.
Unemployment in France has declined more slowly than in most leading European economies, as
a gradual recovery in economic growth and job creation is offset by the number of young people
entering the labour force every year.
The jobless rate for mainland France, excluding its overseas territories, dipped below 10% in the
fourth quarter of last year and fell further to 9.6% in the three months to the end of June. The
number of unemployed people dropped by 74,000 to 2.8 million.
Unemployment was down in all age categories, but the fall in youth unemployment was sharper:
it fell 0.4 points to 24.3%, the lowest since 2014.
The percentage of long-term unemployed those registered as out of work for more than a year
remained stable at 4.3%, however.
Despite the fall, the French unemployment rate remains high compared with some major
economies. In the UK, the jobless rate is 4.9%, while 4.2% of people are out of work in
Germany.

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The employment rate in France was 64.7% in the second quarter, up 0.1 points on the first three
months of the year. The biggest increases in employment were among young people and those
aged 50 to 64.

1.4 INFLATION RATE

Consumer prices in France are set to rise 1.2 percent year-on-year in

February of 2017, compared to a 1.3 percent gain in January, preliminary
figure showed. While prices of food, energy and services rose at faster paces,
cost of manufactured products fell more than in a month earlier. On a
monthly basis, consumer prices are expected to increase 0.1 percent, after a
0.2 percent fall in the previous month. . Inflation Rate in France averaged
4.49 percent from 1958 until 2017, reaching an all time high of 18.80
percent in April of 1958 and a record low of -0.70 percent in July of 2009.

Graph5 :Inflation Rate evolution

Source: http://www.tradingeconomics.com/france/inflation-cpi

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According to revised figures released by the National Statistical Institute (INSEE) on 21
February, consumer prices dropped 0.2% in January (December: +0.3% month-on-month). The
reading reflects lower seasonal prices for manufactured goods, particularly for clothing and
footwear.

Inflation jumped from 0.6% in December to a revised 1.3% in January (previously reported:
+1.4% year-on-year), marking the highest reading since November 2012. The strong increase
reflected higher prices for Brent crude oil and higher taxes on petroleum products. Meanwhile,
annual average inflation in January inched up to 0.3% from Decembers 0.2%.

Harmonized consumer prices (based on the harmonized index of consumer prices (HICP))
dropped a revised 0.3% in January (previously reported: -0.2% mom), contrasting the 0.3%
increase observed in the previous month. Harmonized inflation in December soared from 0.8%
to 1.6% in January, a multi-year high. Meanwhile, annual average HICP inflation picked up from
0.3% in December to 0.4% in January.

FocusEconomics Consensus Forecast panelists expect HICP inflation to average 1.3% in 2017,
which is up 0.1 percentage points from last months forecast. For 2018, panelists project that
inflation will also average 1.3%.

10
CHAPTER 2: ANALYSES OF BUSINESS CLIMATE

2.1 DOING BUSINESS

France has always played a crucial part in both European and World events. After experiencing
two World Wars, the loss of an Empire and numerous political and social upheavals, France has
emerged as a vital component in the European Community with a strong sense of pride and
heritage. Today, the French business market boasts a variety of international investors and is an
important world supplier of agricultural and industrial products. The country also demonstrates
one of the highest rates of economic growth in Europe. However, for those organisations wishing
to enter the French business environment, an understanding of the countrys culture is a vital skill
for your company to possess.
In French business culture it is customary to only use first names when invited to do so.
Sometimes the French will introduce themselves by saying their surname first, followed by their
Christian name.
Lunch is one of the best places to forge business relationships in France, but business lunches are
not as common as they used to be. If invited to one, it is always polite to accept.
A business meeting should begin and end with a brisk handshake accompanied by an appropriate
greeting and the exchanging of business cards.
Despite the formality of French business culture, it is not uncommon practice to stray from the
agenda during meetings. Initial meetings are often dedicated to information sharing and
discussion, rather than reaching final decisions.
Doing business in France 2016 has been written for Moore Stephens Europe Ltd by COFFRA. In
addition to background facts about France, it includes relevant information on business
operations and taxation matters. This Guide is intended to assist organisations that are
considering establishing a business in France either as a separate entity or as a subsidiary of an
existing foreign company. It will also be helpful to anyone planning to come to France to work
and live there either on secondment or as a permanent life choice. Unless otherwise noted, the
information contained in this Guide is believed to be accurate as of 1 July 2016. However,
general publications of this nature cannot be used and are not intended to be used as a substitute
for professional guidance specific to the readers particular circumstances. Moore Stephens
Europe Ltd provides the Regional Executive Office for the European Region of Moore Stephens
International. Founded in 1907, Moore Stephens International is one of the worlds major
accounting and consulting networks comprising 300 independently owned and managed firms
and 657 offices in 106 countries around the world. Our member firms objective is simple: to be
viewed as the first point of contact for all our clients financial, advisory and compliance needs.

11
They achieve this by providing sensible advice and tailored solutions to help their clients
commercial and personal goals. Moore Stephens member firms across the globe share common
values: integrity, personal service, quality, knowledge and a global view.

2.2 INVESTMENT CLIMATE

Ensuring that Frances investment climate is attractive to foreign investors is a priority for the
French government, which sees foreign investment as a way to create durable jobs and stimulate
growth. Investment regulations are simple, and a range of financial incentives for foreign
investors are available. A public and commercial establishment, the French Agency for
International Investment (Agence Francaise pour les Investissements Internationaux - AFII)
integrates all offices responsible for promoting investment in France. The agency combines the
overseas offices of the Invest in France Agencies (IFA), with the Invest in France Network (IFN)
association. Foreign investors say they are attracted to France by its skilled and productive labor
force; its central location in
Europe with its free movement of people, services, capital and goods that took on even greater
significance with the introduction of Euro coins and bills in January 2002; good infrastructure;
and its technology-oriented society. However, despite a decade or more of economic reforms and
liberalization, U.S. and foreign companies often point to very high payroll and income taxes,
pervasive regulation of labor and products markets, and sometimes negative attitudes
toward foreign investors as disincentives to investing in France.
The formal French investment regime is among the least restrictive in the world. There is no
generalized screening of foreign investment. Only acquisitions, irrespective of size or the
nationality of the investors, involving public order the national security of France or the national
defense interests or research-production-sales of armament, ammunition, powders, and explosive
substances are subject to prior approval by the Finance Minister
In applying sector restrictions, French authorities look to the place of residence, rather than to the
nationality, of a potential investor. The place of residence of a corporate investor is determined
by the place of residence of its ultimate beneficial owners, without regard to place of
incorporation. While firms owned or controlled by American citizens legally resident in an EU
country will usually be considered as EU residents, France will normally consider the following
entities with American ownership or participation to be non-EU residents:
Firms established or incorporated in other EU countries, but owned or controlled by American
residents.
For publicly traded entities, firms where non-EU residents own more than 20 percent of a
firms capital.
For non-publicly traded entities, firms where non-EU residents ultimately own or control
more than 33.3 percent of a firms capital, unless physical persons who are EU residents also
own more than 50 percent of the firms capital.
However, for publicly and non-publicly traded firms, the French government retains the
authority to declare that a firm is controlled by non-EU investors, even if the share of capital held
by non-EU investors falls short of the thresholds noted above. To determine if non-EU investors
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control a firm, the French government may look at, among other factors, the residency of
members of the board of directors, and the ability of non-EU investors to veto key management
decisions or commercial ties (such as loans, guarantees, options, licenses, or contracts) if these
factors effectively make the French company dependent on
foreign investors.

2.3 FOREIGN DIRECT INVESTMENTS

According to the World Investment Report 2016, published by UNCTAD, France has risen in the
ranking of the world's most FDI-attractive countries, moving from 20th to 11th place. After three
years of decline, FDI inflow to France doubled between 2014 and 2015, from USD 15 billion to
USD 44 billion. In 2016, FDI influx is estimated at USD 46 billion (UNCTAD, 2017). Paris is
the world's second largest host to multinational headquarters, after Tokyo. Currently, 500
multinationals have their home office in Paris. The country ranked 29th out of 190 countries in
the 2017 Doing Business report published by the World Bank.

Office Real Estate and Land Ownership

Possible Temporary Solutions:There are several temporary solutions: domiciliation of the
company at the private address of the director, domiciliation in a business center, lodging in
relay-workshops (ateliers-relais), company "nurseries" (ppinires d'entreprise) and renting
professional premises.
The Possibility of Buying Land and Industrial and Commercial Buildings:Yes;
It is possible to buy freehold or leasehold, to build industrial and commercial premises or to buy
through a real estate company.
Risk of Expropriation:According to French law, foreign investors are entitled to adequate and
promptly paid compensation if they are victims of expropriation.
The country's strengths include its position as Europe's third power, its highly-skilled workforce,
its large industrial base, its agricultural resources and its geographic location in the centre of
Europe.
Investment Opportunities
The Key Sectors of the National Economy:Aerospace, automobile, food industry,
pharmaceuticals, micro electrotechnology, logistics, health equipment.

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 High Potential Sectors:Call centers, biotechnologies, telecommunications, information and
communication technologies, the environment
Privatization Programmes:Electricity, gas, rail transport and postal services. The government has
not recently announced plans to privatise any of the remaining state-owned enterprises, but it has
drawn down its shareholdings in several companies.
Tenders, Projects and Public Procurement:BOAMP, French Public Procurements (in french)
EBP, Tenders and Projects in France
Tenders Info, Tenders in France
Ted - Tenders Electronic daily, Business opportunities in the EU
DgMarket, Tenders Worldwide

2.4 French Culture Key Concepts and Values

Centralisation France has a long and notable history of centralisation reflected in its
geography, transportation system, Government and business. This outlook originated in the
power and authority of the earlier monarchs and despite the democratic society, remains a
significant part of the French presidency today. In the world of French business, centralisation
exists in the concentrated authority that generally lies with one individual.

Individualism and individuality Frances distinguished individuality is an important cultural

characteristic that describes the French passion for uniqueness and freedom of opinion, both in
society and in business. However, individuality should not be confused with the term
individualism, which is equally essential in France, but refers to having a separate but equal
sense of place in society. Individualism in the French business environment means that a greater
concern is placed on social status and being judged as an individual.

Uncertainty avoidance One aspect of French culture that has a major influence on business in
France, is the countrys attention to rules and regulations. The French have a low tolerance for
uncertainty and ambiguity, which, for those wishing to conduct business in France, is significant
in their reluctance to take risks.
Business practices
In French business culture it is customary to only use first names when invited to do so.
Sometimes the French will introduce themselves by saying their surname first, followed by their
Christian name.
Lunch is one of the best places to forge business relationships in France, but business
lunches are not as common as they used to be. If invited to one, it is always polite to accept.
A business meeting should begin and end with a brisk handshake accompanied by an
appropriate greeting and the exchanging of business cards.
Despite the formality of French business culture, it is not uncommon practice to stray
from the agenda during meetings. Initial meetings are often dedicated to information sharing and
discussion, rather than reaching final decisions.

14
 Business Etiquette (Dos and Donts)
DO maintain an air of formality and reserve during all business practices and at all levels
within the business, using titles wherever possible.
DO make direct but moderate eye contact with your French business colleagues.
DO try to learn a few basic French phrases and use them whenever possible. Your efforts
will not go unnoticed.
DONT discuss your family or other personal matters during negotiations.
DONT be put off by frequent differences in opinion and rigorous debate during business
negotiations. The French will appreciate your ability to defend your position.
DONT rush or display signs of impatience with your French counterparts. The French
take their time before arriving at a decision.

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 CONCLUSION

France is one of the world's top ten economic powers and is strategically located in the centre of
Europe. It is an innovative country with a highly developed tertiary sector. It has quality
infrastructure, substancial agricultural resources and a large industrial base. The workforce is
qualified and productive (the second in Europe in terms of hourly productivity). The business
environment is conducive to investment and the legal environment is relatively transparent and
stable. But, there are some drawbacks of the French market: it has one of the highest taxation
rates in the world, significant manpower costs and low competitiveness in some sectors, which
can hinder economies of scale. Research suffers from insufficient collaboration between the
public and private sectors. In recent years, low economic growth, lack of predictability in
economic and budget policy and the increased complexity of the tax and labour regimes have
been possible barriers to investment. Government Measures to Motivate or Restrict FDI.So,
Foreign companies enjoy the same government aid as French companies (aid for productive
investment, R&D, professional training, job creation, etc.). The number of administrative
formalities for foreign companies to set up in France has been significantly reduced in recent
years.To fight against the financial crisis, the French Government has implemented different
measures: the implementation of a EUR 20 billion corporate tax credit programme (crdit
dimpt comptitivit emploi), and the elimination of a corporate social solidarity tax to attract
investors; the creation of a research tax credit (crdit impt recherche) and tax incentives for
innovative new companies (jeune entreprise innovante); and the creation of new labour laws
which strengthen vocational training and add elements of flexibility to the French labour market.

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 BIBLIOGRAPHY

Web-sites

1. http://atlas.media.mit.edu/en/profile/country/fr/#Exports
2. https://www.quandl.com/collections/france/france-economy-data
3. https://www.dur.ac.uk/ibru/news/boundary_news/?itemno=11053&rehref=%2Fibru
%2F&resubj=Boundary+news%20Headlines
4. http://www.tradingeconomics.com/
5. http://www.doingbusiness.org/data/exploreeconomies/france/
6. http://www.heritage.org/index/country/france

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