Francois Fillon, the recently appointed French prime minister, announced at the World Investment Conference in La Baule on June 29 that his government would sweep away the red tape, burdensome labour laws and opaque tax regime that have discouraged foreign investors.

“For decades, French governments have spoken a lot about being attractive for foreign investments,” said the prime minister – breaking with protocol and speaking in English. “But when it came to the crunch, we too often gave you the image of a country with escalating social contributions, an increasingly complex legal system, and discouraging red tape.

“That’s all over! We are going to make France a country where it’s easy to do business, where you can concentrate on running your company without hassle or pressures, other than those of the market. We’ll give you compelling evidence that French people are back at work.”

Mr Fillon told the audience of more than 500 business leaders and investment professionals that the new government’s parliamentary programme would include three fundamental reforms.

Taxation reform

The first set of reforms concerns taxation. French citizens who want to work more and earn more money will be free to do so. Overtime working will be exempt from income tax and social charges and investments in French small and medium-sized enterprises will be tax-deductible.

The second area concerns proposed reforms to the universities. Under the proposed new system, they will be independent of central state control, will have the right to recruit their own academic and research staff and will be able to enter into partnerships with local authorities and businesses and set up business incubators.

The third reform relates to the guaranteed provision of public transport during periods of industrial strife. “France is fortunate in having a first-rate public transport system, which is the envy of many developed nations,” said Mr Fillon. “However, these public services are too often held hostage during times of social or industrial unrest. It is not acceptable that workers should be prevented from reaching their place of work. We are going to oblige transport provides to ensure they have emergency measures in place so that a minimum level of service can always be assured.”

Good relations

In an interview with fDi magazine, Invest in France’s chief executive Philippe Favre argued that the reality is better than the picture put forward by his prime minister. “French industrial relations are good,” he says. “Only 40 days per 1000 workers were lost to industrial action last year. Although France is still behind the UK when it comes to foreign investment into Europe, we actually had an excellent 2006, with about 40,000 jobs and 665 investment projects.”

France’s maximum 35-hour week labour laws have blighted the country’s productivity since they were introduced by the socialist government in 1997 and have failed in their aim of cutting the country’s unemployment level, which remains stubbornly high at more than 8%. The measures announced by the prime minister include a new type of employment contract which will also make it easier to hire, and, if necessary, fire workers.

Ernst & Young’s Investment Attractiveness Survey, also announced at the La Baule conference, shows that Europe maintains its lead as the most attractive global investment region, but the European focus is shifting eastwards. France and Spain have dropped out of the top ten countries worldwide, while Poland and the Czech Republic are enjoying increased levels of investment.

UK and France remained the two top European destinations for FDI, with the UK attracting just under 20% of investments in Europe in 2006, compared with France’s 16%.