France

France invest

Philippe Favre, Ambassador, special representative for international investment, and President of the Invest in France Agency, outlines progress in FDI over the past year, and looks at what the country has to offer

R&D investors benefit from a focus on their needs

2006 was marked by further increases in FDI flows, which reached $1,230 billion, almost the equivalent of the record levels achieved in the year 2000. The decline of 2001-2002 is therefore behind us. In spite of increasing competition from emerging and transitional countries, this increase has been largely beneficial to developed countries, and Western Europe in particular. This positive trend can be explained by a record number of international mergers and acquisitions, for the most part acquisitions of businesses located in industrialized regions, but also the vibrancy of investment projects leading to new jobs.

France has profited from these positive trends. The flow of inward FDI and the number of jobs directly resulting from foreign investment have reached new record levels. According to statistics produced by the Invest in France Agency, which are set out in the present report, 40,000 jobs were created in 2006 by foreign companies doing business in our country. France has proved once again that it is very open to international investment, and that it presents strong levels of attractiveness compared to its European neighbors – particularly in activities that involve innovation and in high-added-value service sectors. Today, over 1.9 million people are employed by foreign businesses in France, which is almost 16% of the total number of employees in the market sector; and 47% of capital in the CAC 40 is owned by non-residents.

France’s strengths are well known: a highly skilled and productive population, high-quality infrastructures at the heart of the biggest market in the world, and an economy that is at the leading edge of innovation in key sectors such as aerospace, nanotechnology and healthcare. One demonstration of this is the investment project announced in 2006 by GSK near Valenciennes, in the north of France: a €500 million investment for the production of cancer vaccines, which will create 600 new jobs over three years.

The government is committed to an active economic policy to consolidate these strengths. A number of reforms in the tax, legal and administrative systems have been implemented over recent years, in order to improve the business environment in France. The 66 clusters, created at the initiative of private businesses and their public and private sector research & development partners, have led to vibrant local partnerships being set up to launch new innovative projects. These measures and programs help to make France more attractive to investors and international talent.

In its own way, the IFA is working to contribute to this positive performance by improving its methods of prospecting and assisting foreign businesses, and its after-care service; by expanding the scope of its activity to include regions that are potentially new sources of investment capital; and by developing its collaboration with regional partners.

• An innovative France
• An open France
• A winning France

It is a country that is geared toward the future, which we invite you to discover.

Phillipe Favre

 

Why france? an investor explains

On September 29th, 2006, the British laboratory GlaxoSmithKline (GSK) announced plans to build a new production unit for vaccines, at the site of its Sterilyo subsidiary at Saint-Amand-les-Eaux This is the biggest investment in the pharmaceutical industry in France in 10 years. Christophe Weber, ceo of GSK France, explains why.

What was the origin of this project?

GSK discovered a new vaccine to protect against cervical cancer, called Cervarix®.We wanted to produce this vaccine at several different sites around the world: one for each major market region, taking into account logistics issues and in order to optimize our distribution process. Regarding the European site, the project first came up for discussion in 2005. Several different countries were in competition for the project: Ireland, Hungary, Belgium, England and, of course, France. Each of these countries offered various advantages: the British Isles for example offered a very favorable business environment, and significant tax and financial incentives.

What were the various stages of the decision-making process?

Competition between the various sites was strong right up to the end, which led to intense discussions. Each national subsidiary was, of course, trying to promote the advantages of its own location, acting as spokesperson for that location within the group. Because of the diversity of our location criteria – industrial logic, infrastructure and availability of manpower, tax and financial issues, status of national pharmaceutical drugs markets – the decision was not an easy one. The decision was eventually taken by the CEO of the group in June 2006, and ratified by the board of directors in July. A project of this size does not come along every day and we could not let it slip by. I am pleased that we succeeded.

What were the deciding factors in favor of France?

From the start, France offered significant advantages: a market that optimizes our pharmaceutical products; recognition of intellectual property rights; finally, the tax initiative concerning tax credit based on investment, which was launched in 2006, and which was perceived by pharmaceutical groups as a very positive signal from the French administration. But the final decision was based, above all, on industrial logic: our Sterilyo production site at Saint-Amand-des-Eaux, which specializes in lyophilization (freeze-drying), is working successfully. It is close to our large vaccine production site in Belgium, in the suburbs of Brussels, which is where a highly sensitive component of Cervarix®, the antigen, will be produced. Moreover, there is a ready availability of skilled manpower.

What was the role of the local authorities?

The project received political and administrative support: Lord Mayor of Saint-Amand, NFX (the regional economic development agency), other local and national authorities, the IFA and various government ministries. The Valenciennes “sous-préfecture” administrative service was very efficient; they organized contacts with all the local technical services, and coordinated their planning – which is an enormous undertaking but indispensable, given the complexity of the investment project. Also, support from the French government and a letter received from Thierry Breton, the French minister for economic affairs, were deciding factors.

What are the next stages in the development of this project?

The site represents an investment of €500 million and the creation of 300 jobs by 2009, and a further 300 jobs by 2011, which is when we expect the site to be in commercial production. Timescales regarding industrial investment, setting up production chains and authorizations for new products will in fact be quite long: five years in total. The teams therefore need to be set up long before production starts, in order to enable the various authorizations to be obtained. We will put this long period to good use, by consolidating and developing our existing expertise at our lyophilization and filling site, which will be useful not only in the production of Cervarix® but for other vaccines as well.

What will be the economic impact of this project in the area?

This project, as is usually the case in the vaccines industry, will involve a high-added-value production process very similar to an R&D project, which will require highly qualified manpower. For this reason, the site will necessarily remain in the same location for a considerable length of time, probably 10 of years. It will also have positive economic repercussions: according to a study carried out by Cemka consultants, each job directly created by GSK will lead on average to a further four jobs being created within the French economy.

How do you see the future of GSK in France?

Apart from the Valenciennes project, this year we have also created 600 more jobs in France at our existing sites, and consolidated our R&D center at Les Ulis. We are optimistic for the coming years, provided that French government policy regarding pharmaceutical drugs does not change untowardly, since we are necessarily totally dependent on that policy. We are in favor of extensive structural selectivity in the market, reimbursement of the most innovative drugs and the development of generic drugs when licences terminate. However, in France, financial pressure on the pharmaceutical industry is too high: various taxes (promotion, specific reimbursement, etc.), lowering of authorized prices, legislation to limit the growth of the market, notwithstanding the level of innovation. It is necessary to understand that the pharmaceutical industry is highly international, and that competition between countries to attract new project developments is very strong. France still has some strengths; however, these should not be undermined but rather developed further by means of industrial strategy in favor of this sector which is R&D intensive.

 

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