Doing business in France


"Doing business in France" is a 270-page booklet published in 1993 with a 50-page supplement from January, 1994. It is available free (sometimes) from Price Waterhouse, an accounting and consulting firm with offices in most countries.

Extracts from chapters 1 and 2 and table of contents:

See also:

French embassy, Canada
gopher://avril.amba-ottawa.fr/11/rep1/rep19/rep195

Agences de développement, business guides, various reports
http://www.business-in-europe.com/frsite.htm

Arthur Andersen - International Executive Services: Suggested Readings For France.
http://www.arthurandersen.com/BUS_INFO/SERVICES/IES/almanac/france/frread.htm

U.S. Chamber of Commerce, France (guide for sale)
http://www.amb-usa.fr/fcs/fcsguide.htm

Invest in France
http://www.investinfrance.com

Perspective from New Zealand
http://www.tradenz.govt.nz/profiles/countries/france.shtml

French-American Chamber of Commerce of No. Ohio, guides for sale,
links to other FACCs in the USA
http://www.faccno.org/

Ile de France
http://www.rubicon.com/idf.html

Business contacts in France
http://www.euromktg.com/ebc/ebc-f/business.html

Note from Price-Waterhouse
http://sys1.tpusa.com/infosrc/pw/fra/partner.html

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(Attention: faults due to scan/OCR)


Chapter 1, France - A Profile

Investor considerations

o Stable government.
o Educated work force.
o Relatively high rate of unemployment.
o Efficient national transportation system.
o The rate of inflation is similar to those of other industrialized European
  countries.
o Mineral resources are limited.
o Capital investment in industry is needed.

Geography and climate
France, located near the geographical center of Western Europe, is bordered 
by the North Sea and the English Channel in the north, the Atlantic
Ocean in the west snd the Mediterranean Sea in the south. It has common 
frontiers with Andorra, Belgium, Germany, ltaly, Luxembourg, Spain
and Switzerland.

Metropolitan France is the largest country in Western Europe. Its circum-
ference is approximately 5,670 kilometers (3,000 miles) and its area
550,000 square kilometers (213,000 square miles). (The principal sources
of statistical data are the Institut National de la Statistique et des Etudes
Economiques (INSEE) and the Organization for Economic Cooperation
and Development (OECD).) In 1968 France reserved its right to exploit
the continental shelf. In 1971 it extended its territorial waters to 12 
nautical miles, and in 1976 its economic zone (i.e., the right to explore 
and exploit the natural resources) to 200 nautical miles.

France has an extremely varied topography, ranging from 4,807 meters
(15,770 feet) high in the Alps to more than 2,700 kilometers (2,175 miles)
of seacoast. The climate is temperate. The annual temperature varies
from 9°C (50°F) to 16°C (61°F) and the annual rainfall measures between
410 and 1,200 millimeters (22 and 59 inches).

Major French cities are Paris, the capital; Lyons; Marseilles; Lille; 
Bordeaux; Strasbourg; Toulouse; Nantes; and Nice.


Political system

The French government is republican in form. The current Fifth Republic
was proclaimed in September 1958 by Charles de Gaulle. A new Constitution 
was introduced, limiting the power of the Parliament and making the
president a powerful executive.

Under the 1958 Constitution, as modified in November 1962, the president 
is elected for a seven-year term, renewable once, by direct popular
vate. He appoints a prime minister and approves the prime minister's
selection of other ministers. In the case of a national emergency, the
president may assume extraordinary powers.

The French Parliament is bicameral, composed of the National Assembly
and the Senate. The Assembly is the more important chamber and its
members are elected for five years by popular vote. Senators are elected
for nine years by an electoral college.

The major political parties are, on the right, RPR (Rassemblement pour la
République) and UDF (Union pour la Démocratie Francaise) and on the
far right wing, the National Front; on the left, the Socialist Party; 
and further left, the Communist Party.

For two decades the president and the majority of Parliament were members 
of the same conservative coalition. In 1981 Francois Mitterrand, a
Socialist, was elected president over the incumbent president, Giscard
d'Estaing. The Socialists also controlled Parliament up to the 1986 parlia-
mentary elections, when the conservative coalition regained control. For
the first time in recent French politics, the majority in Parliament was not
that of the president's party. President Mitterrand obtained operational
political efficiency by naming one of the leading conservatives, Jacques
Chirac, as prime minister, with a mixed cabinet from both the right and
left, a situation the French call cohabitation.

France is a former colonial power. In 1939 it had colonies in Africa, South
America and Asia, uniting 110 million people over 12 million square kilo-
meters. Most of the former French colonies obtained their independence
in the years following World War II. France maintains privileged relations
with its former colonies, particularly in the economic sphere.


Legal system

Civil law
The civil law system is based primarily on codes and statutes that are
intended to constitute the totality of the law. In theory, the role of courts is
to interpret this body of law. When the law is not clear, the courts may
look to the intent of the legislators. Although French court decisions per
se do not have precedential value, the supreme judicial court has the
power to effectively establish a rule of law (see below). Unlike the common 
law system, the French civil law system does not generally provide
injunctive relief or specific performance. Arbitration either by the French
courts or by international bodies, the best known being the International
Chamber of Commerce of Paris, is available.

Laws and regulations

o Laws
A bill submitted by the government becomes law only after it is approved
by the National Assembly and the Senate, signed by the concerned
ministers and the president of the Republic, and published in the Journai
Officiel.

o Decrees
A decree is issued by the executive to implement laws and to exercise
the regulatory powers granted it by the Constitution.

o Ordinances
The Parliament may authorize the executive to issue ordonnances on
subjects normally within the exclusive competence of Parliament.

Arrêtés, circulaires, instructions, and notes
These are issued under the executive's rule-making authority. Laws may
be contested before the Constitutional Court (see below).

Decrees, ordinances, arrêtés, circulaires, instructions, and notes may be
contested before the administrative courts (see below).

Court system

There are two principal types of courts, the judicial and the administrative
There are also specialized high courts.

o Judicial courts

The two principal lower courts are the Tribunal d'Instance and the Tribunal
de Grande Instance. These courts are presided over by professional
judges and have both civil and criminal jurisdiction. In addition, there are
specialized courts: the Conseil de Prud'hommes, a labor court (see
"Unions" in Chapter 10), and the Tribunal de Commerce, or Commercial
Court, presided over by judges elected from the business community and
having exclusive jurisdiction over litigation between merchants and in
matters involving commercial acts. The Commercial Court is also respon-
sible for the Commercial Register (Registre du Commerce et des
Sociétés).

At the appellate level, there are 28 Cours d'Appel, which review both
questions of law and of fact on decisions appealed from the Tribunaux
d'Instance and de Grande Instance, as well as the Commercial and Labor
Courts.

The supreme judicial court is the Cour de Cassation which hears appeals
from the appellate courts and final decisions of lower courts. The Cour de
Cassation decides issues of law, not of fact. One of its principal purposes
is to ensure the harmony of case law.

Even though lower courts are free to apply their interpretation of the law to
the facts, there is one instance where the lower court must apply the law
as interpreted by the supreme judicial court. Where the Cour de Cassation 
reverses the decision of a lower court, it must remand the case to
another court of the same competence, which reexamines both questions
of fact and of law. Where this lower court holds in the same way as the
first lower court, its decision may be appealed. If ihe Cour de Cassation
reverses the second lower court's decision, it remands the case to
another lower court, which must adopt the legal interpretation of the Cour
de Cassation.


o Administrative courts

The lowest court is the Tribunal Administratif or Administrative Court,
which has exclusive jurisdiction over all litigation to which the state is a
party.

An intermediate level-Cour Administrative d'Appel was introduced as
from January 1, 1989. This court has appellate jurisdiction over both fact
and legal issues. There are five Cours Administratives d'Appel: Bordeaux,
Lyons, Nancy, Nantes, and Paris.

The highest administrative court is the Conseil d'Etat. It has final 
jurisdiction over legal issues. It also has exclusive original jurisdiction 
to determine the legality of decrees, other administrative decisions, and 
income and other tax questions, except those regarding registration tax. The
Conseil d'Etat must be consulted by the government to produce an advisory 
opinion on bills before submission to Parliament and may be consulted 
on certain governmental acts (e.g., decrees and ordinances) prior to Issue.

Specialized high courts

Of the specialized high courts, the Constitutional Court (Conseil Constitu-
tionnel) merits specific mention. The Constitutional Court is composed of
nine members who are named to nine-year terms of office and of former
presidents of the Republic who are members of the Court for life. The
purpose of the Court is to determine if proposed laws are constitutional.
The constitutional issue may be raised only by the president of the
Republic, the prime minister, the presidents of the National Assembly and
the Senate, or a group of 60 senators or deputies.

Legal profession

The legal profession, reorganised in 1971, is currently divided into more
or less distinct branches of activities.

Notaires

Notaires have a monopoly in the areas of transferring real property and
testamentary and matrimonial acts, which by law must be in the form of
an authentic document (acte authentique) that is verified and stamped by
a notaire. French notaires play a far more important roie in the French
legal system than American notary publics.

o Avocats

An Act dated December 31, 1990 provided that the professions of avocat
and conseil juridique were to be merged into a single profession, that of
avocat. Avocats will act as legal and tax advisers and represent clients
before the courts. The unification took effect as of January 1, 1992.

o Avoués à la cour

Avoués are specialists in procedure and written pleadings before the
Cours d'Appel.

o Juges-commissaires and administrateurs judiciaires

These are individuals appointed by a court to temporarily manage businesses 
that are in judicial receivership.

o Huissiers de justice

Huissiers de justice are specialized professionals who serve process, give 
official notice of documents, conduct execution of judgments and seizure 
orders by courts, and record facts for subsequent use in legal proceedings.

Population and social patterns 
Population 
According to INSEE, at July 1, 1992 the population was estimated 
at over 57.35 million persons, compared with 56.3 million at the beginning 
of January 1989. The average population density was 103 inhabitants per 
square kilometer, but the density per department varies considerably: 
in 1991 there were 20,421 inhabitants per square kilometer in Paris, 
compared with 339 in the Bouches-du-Rhône and 91 in the Gard. At the 
beginning of 1991 Paris had over 2.1 million inhabitants and the greater 
Paris region (Ile de France) had 10.3 million, while the Lyons and 
Marseilles regions had over 1 million inhabitants each. According to 
1991 INSEE statistics, the average age of the population is 36.9 years: 
the 65-years-or-over age bracket represents 14.3 percent of the population; 
the 20-to-64 age bracket, 58.6 percent; and the under-20 age bracket,
27.1 percent. Births dropped from 881,000 in 1971 to 759,000 in 1991. 
Life expectancy in 1991 was 81.1 years for women and 73 years for men. 
In 1991 the annual population growth rate was 0.4 percent for France, 
compared with - 1 percent for the United States and 0.04 percent for 
the United Kingdom. Foreign nationals account for approximateiy 8 percent 
of the population.

Language

The principal language is French. Many French business people speak English.

Religion

Under a 1905 law, church and state are separate. The principal religion is 
Roman Catholicism, but all major religions are represented in France.

Education

Noncompulsory preschool instruction is available for children aged two to 
five. For children between the ages of six and sixteen, school attendance 
is compulsory. Children between the ages of six and eleven attend primary 
schools and those between the ages of eleven and sixteen attend 
collèges. Upon completing collège, children may attend lycées, which provide 
either technical training or general education. After successfully 
completing three years of lycée, students are entitled to enter the higher 
education system. Higher education is provided by 78 state universities 
(the 16 universities in the Paris region account for 31 percent of the 
total student population), 7 university centers, 3 national technical 
institutes, and the grandes écoles. A major change is that more students 
than ever are enrolling in business schools, but 34 percent of university 
students pursue studies in the humanities. Instruction and education 
provided by the public school system are free of charge and the universities 
charge a nominal annual fee for the right to use facilities like the library 
or gymnasium. There are also private schools and universities, certain of 
which are bilingual.

 Living standards

OECD comparative statistics show that for 1990 the average annual increase 
in hourly private industry waye rates in France was 3.2 percent, compared 
with 2.3 percent in West Germany and 11 1 percent in the United Kingdom. 
At current prices, OECD statistics show that per capita gross domestic 
product (GDP) in France was US$21,030 in 1491, compared with US$17,470 
in the United Kingdom, US$24,130 in West Germany, and US$21,890 in the 
United States.

According to INSEE, unemployment was at 2.9 million persons, or 9.4 percent 
of the labor force, on January 1, 1992, having increased from 9.1 percent 
on January 1, 1991.

Over the last two decades, the level of comfort in French dwellings has 
increased enormously.

While rents in France increased by 4.6 percent in 1991, the annual rate 
of increase has slowed from 13.5 percent in 1981.

The standard of living of middle and upper-level management is approximately 
equivalent to those of similarly situated executives in other industrialized 
nations.

Cultural and social life

France is known as the world's culinary center and as the country of luxury 
goods. Major metropolitan centers abound with some of the world's greatest 
works of art, as well as with theaters, ballets and operas. France's varied 
topography allows for the exercise of nearly any land- or water-based 
recreational activity.

The Economy 
General description 
A government-sponsored slogan summarized the underlying economic situation: 
"France lacks oils but not ideas." Deficient in most natural resources 
(see below), France has made a concerted effort to develop other sources 
of energy (e.g., nuclear power plants) and to modernise its industry in 
order to increase its export capacity and to supply its domestic market. 
It is evident that the French economy can no longer be considered in 
isolation. France's principal trading partners are other countries of the 
European Community.

France was one of the six original signatories of the 1957 Treaty of Rome, 
which established the European Economic Community (EEC) (now often referred 
to as the European Community EC). The other signatories were Belgium, 
Germany, Italy, Luxembourg, and the Netherlands. In 1973 the United Kingdom, 
the Republic of Ireland and Denmark became members, as did Greece in 1981 
and Spain and Portugal in 1986. The basic objective of the EC is the 
creation of a European union.

The first major step in the unification of Europe will be the economic one, 
which will create a single market of over 320 million people. This will begin 
with the complete elimination of tariffs and duties between member states 
as of January 1, 1993. After this date, there will be few restrictions on 
the free flow of goods, services and capital. Following EC directives, 
France and the other member states have implemented new laws to achieve this 
objective.

The extent to which political and monetary union will proceed is not 
entirely clear. At present the member states retain sovereignty in many 
areas. On December 1991 the Treaty of Maastrich was neciotiated between 
all the member states. It provides for a real economic and political union 
as from the date of ratification by all member states. This treaty was 
ratified in France by a referendum held in September 1992, which was won 
by a very slight majority. At the time of writing, the Treaty of Maastrich 
has not yet been ratified by several of the member states; thus, its future 
application in uncertain.

The EC has its own Parliament, Council of Ministers, Commission, and Court 
of Justice, but these European institutions have limited competence and 
jurisdiction.

For more information on the European Community, see the Price Waterhouse 
Information "Guide Doing Business in the European Community".

French economy

France has a balanced and highly diversified market economy in which 
industry accounts for approximateiy 27 percent of gross domestic product 
or GDP (produit intérieur brut), services account for more than 68 percent, 
and construction, transportation and agriculture play an important role. 
France has ranked for the past 20 years as the West's fourth economic power. 
Recently the rise in wage rates has slowed and inflation has been reduced 
to practically nil. Corporate profits, despite the worldwide economic 
downturn, have remained respectable.

France's agricultural production substantially satisfies its basic food 
requirements. Aided by its favorable geographical location and its close 
ties with former French overseas territories, it is actively engaged in 
world trade, exporting principally manufactured and agricultural products.

The French economy was significantiy affected by the oil crisis that 
accompanied the Gulf War, as well as by thc recession (although less than 
in the 1970s), because France's economy is still related to oil prices 
and France has few oil reserves and pays for imported oii in U.S. dollars. 
In order to reduce its dependence on imported enercly, after the first oil 
crisis at the end of 1973 France invested heavily in nuclear energy (from
which it obtains 75 percent of its electricity), natural gas and hydroelectric
power plants, but it still relies on imported energy. The annual expenditure
in 1990 was F120 billion.

Gross domestic product
According to the OECD, for the year 1990 the average annual volume in
growth of French real gross domestic product (GDP) at constant prices
was 2.8 percent, whereas the West German average growth rate for the
same period was 4.5 percent, the United Kingdom's 0.8 percent, and the
United States' 1.0 percent. For composition of GDP in 1990, see Table I.

 
Table I
Gross Domestic Product by Sector, 1990
(In billions of francs)


Sectors of origin

Central government...................................................861,031
Corporate and quasl-corporate enterprises

Nonfinancial ..........................................2,851,076
Financial.................................................(9,500)  2,841,576
 
Househoid and private unincorporated enterprises...................1,128,741

Owner-occupied housing
Subsis~ence production

Other
Nonprofit institutions saving households..............................15,017
Subtotal :
 Domestic factor incomes...........................................4,846,365

Indirect taxes  .....................................................971,116
Less - Subsidies  ..................................................(145,822)
Consumption of fixed capital.........................................812,450
Statistical discrepancy..............................................      -
                                                                  ==========
Gross domestic product.............................................6,484,109

Source: OECD.

In 1991 France's real GDP was US$1,191.4 billion, compared with
US$1,553.8 billion for West Germany, US$1,008.8 billion for the United
Kingdom, US$1,133.4 billion for Italy, and US$5,552.2 billion for the
United States, representing 1990-1991 GDP growth of 1.3 percent for
France, 3.2 percent for West Germany, - 1.9 percent for the United Kingdom, 
1.1 percent for Italy, and 0.7 percent for the United States. GDP is 
forecast to increase in France by 2.1 percent in 1992 and 2.7 percent
1993 (see Graph I) [not included].


o Economic plans

Since 1946 the modernization and expansion of capital facilities have
been carried out under five-year economic plans. Rather than establishing 
specific directives, these plans establish a general framework for
economic, social and cultural objectives to be achieved through public
and private expenditures. The Tenth Plan covers the period 1989-1993.
Concerning industrial policy, the Plan establishes a strategy of large-scale 
industrial re-employment in order to achieve one of its principal aims: the
reduction of public funding of heavy industry. It aims to concentrate public 
support on high technology industries, such as computers, software,
electronics, robotics, new communication technologies, aerospace, and
biotechnologies. with fundamental and applied research receiving major 
emphasis.

The Socialist government had aiready paved the way with the Ninth Plan
by introducing in I982 and 1983 a series of five-year action plans for the
major industriai sectors of the economy. For example in July 1982 the
Filiere Electronique action plan established the horizontal and vertical
integration and reorganization of Ihe electronics indusrry, regrouping 11
sectors to achieve the optimal allocation of human and material
resources, research and development, production, and distribution, in
order to reduce imports and to increase exports of new electronic prod-
ucts and services.

From 1986 to 1988, under the guidance of Prime Minister Jacques Chirac,
France initiated a program to denationalize banks and insurance, computer 
and industrial companies that had been nationalzed at the end of
World War I, after World War II (most importantly) or in 1982. One-half of
the 65 businesses scheduled to be returned to the private sector were
denationalized prior to February 1988, with the sale of shares generating
almost F71 billion. Few public companies have been privatized since 1988.

Inflation rate trends

The trend in the inflation rate has been downward over the last ten years.
For an illustration of this pattern, see Graph II [not included]


Mineral and energy resources
France is deficient in most natural resources except aluminum, of which it
is the world's 12th-largest producer. France ranks 1Oth in world production 
of steel. Production of coal and iron ore has declined considerably
because these minerals are not of high quality. France ranks fourth in
world production of uranium. To compensate for its lack of petroleum,
France has constructed nuclear power stations.

Agriculture

France, which has approximately 55 million hectares of land, of which
over 35 percent is cultivated, ranks fourth in the world after the United
States, the former U.S.S.R. and Japan in the number of tractors. In 1991
France was the world's largest producer of wine, fifth largest producer of
wheat, eighth-largest producer of corn, and thirteenth-largest producer of
beef and veal. France is the world's second-largest and the EC's largest
exporter of agro-alimentary products.

Over the iast 20 years the agricultural labor force has dropped by approx-
imately 60 percent. Recent OECD statistics indicate that agricultural
workers represent 7.1 percent of the total labor force.

The agricultural sector of the French economy is markedly affected by the
EC agricultural policy. The three primary principles of this policy are a
unified market, Community preferences and financial solidarity. The principal 
result of this policy is a system of common prices. The price paid for
virtually all agricultural products throughout the EC is determined both by
market supply and demand and by decisions made jointly each year by
the EC member states. The objective is to preserve a minimum living
standard for farm workers and to promote steady growth in agricultural
output. One consequence of this policy is that agricultural products from
non-EC countries may not be sold in the EC at prices below prescribed
minimum levels, which are being progressively reduced. In order to main-
tain a minimum level of demand, the French authorities are financing
research of "bio-oil": colza diester and sugarbeet ethanol.

Manufacturing

lndustry is an important sector of the French economy. In 1991 it
accounted for an estimated 24.4 percent of GDP and employed an estimated 
6.4 million persons. In 1989 French industry represented approximately 
5.5 percent of OECD countries' industrial activity; this percentage
was 8.2 in 1970. France's growth rate was 10.2 percent in 1990 and is
estimated to be 6 percent in 1991. Productive investment currently
accounts for 12 percent of GDP, whereas 15 years ago this figure was 15
percent. Corporations most frequently record growth through the acquisition 
of going concerns. Funds are either self-financed or obtained through
the traditional financial markets. Economic plans have given the highest
priority to industrial growth and re-employment. According to INSEE
statistics, total industrial production (excluding construction and public
works) was F997 billion in 1988 and F1,061.5 billion in 1989. As measured
by the volume-of-production index, total industrial production (excluding
construction and public works) increased by 2.5 percent in 1990.

French industry is highly concentrated in a few areas, principally the Paris
region, the coal-producing areas of Nord and Pas-de-Calais, the vicinity
of the iron-ore deposits of Lorraine, and around Lyons in the Rhone valley.
In recent years, there has been large-scale industrial development in and
around certain coastal areas, primarily Marseiiles, Dunkirk and the lower
Seine valley. The government encourages decentralization of industry in
order to promote the development ol less-industrialized areas (see Chapter 4).

Companies established in enterprise zones (see Chapter 4) are not eligable 
for any other government aid normally granted through the regional
development program.

High-tech industries

France is a leader in the fields of aeronautics and space industries, 
professional electronics, software, and telecommunications. French multina-
tional companies are acquiring and establishing joint ventures with EC
and non-EC companies to better compete on the world market. Such
French-based companies as Thomson, Airbus, Dassault, Rhone-Poulenc,
Matra, Alcatel-Alsthom, Arianespace, and Cap Gemini Sogeti have
gained worldwide recognition as leaders in their fields.

Service industries

The service industry, the most important and fastest-growing economic
sector, employs 2.4 million people. Advertising, computer services, 
management consultancy, and other advanced business services are readily
available and are of high quality.

France does not have any special financial facilities, such as offshore
banking or status as a tax haven, with the exception of special laws in the
Principality of Monaco.

Transport

France has a railroad network of over 35,000 kilometers (21,125 miles).
This network is operated by the Société Nationale des Chemins de Fer
Francais (SNCF), a state company. Reliable turbo-trains (TGV), with a

speed of over 200 m.p.h., continue to be introduced between major
French cities. For example, the trip from Paris to Lyons now takes two
hours; Paris-Grenoble, three and one-half hours; and Paris-Marseilles, four
and one-half hours. In addition to the TGV lines to Switzerland and to
Belgium (completion date 1993), France is linked to other European
countries by the Trans-Europe Express trains. Among the other cities
currently served by the TGV lines are Avignon, Bern, Besancon, Bordeaux, 
Chambéry, Dijon, Geneva, Lausanne, Le Mans, Lille, Montpellier,
Nice, Rennes, St. Etienne, Toulon, Toulouse, and Tours.

Agreements have been signed that will enable the extension of TGV lines
to Brussels and Cologne. At the beginning of the next decade, TGV traffic
will represent 40 percent of the passengers carried by the SNCF.

The SNCF is modernizing its rolling stock for both passengers and freight.
France ranks seventh in the world for the number of passengers carried
and eighth in terms of the tons of freight carried.

On July 28, 1987 French President François Mitterrand and English Prime
Minister Margaret Thatcher signed a treaty for the construction and operation 
of a tunnel connecting the two countries across the English Channel.
Scheduled to be opened in 1993, the tunnel will permit automobiles and
freight to be transported by means of a rail-ferry. High-speed TGV trains
will link Paris and London; travel time will be three hours, with a 35-minute
passage in the tunnel.

o Subway systems

Paris has had a subway system, known as the Métro, since 1900. The
subway network and cars are being modernized to provide greater pas-
senger comfort and security. A high-speed subway network, the Regional
Express Railway (RER), connects the center of Paris with major suburbs.
Lille, Lyons and Marseilles also have subway networks, and construction
is under way for a new system in Toulouse.

Aviation, roads and waterways

France has three national airlines: Air France, UTA and Air Inter. In 1986
France ranked fifth in the world for passengers and freight carried. The
French road network consists of over 362,100 kilometers (225,000 miles)
of national and departmental highways and expressways.

France has over 8,500 kilometers of navigable waterways over which
more than 6 billion metric tons of freight were transported in 1989. In
terms of tonnage, the most important port is Paris. France's merchant
marine ranks twentieth in the world.

Telecommunications

In 1990 the French Post Office had 524 telephone lines per 1,000 inhabit
ants and over 27 million subscribers. It has developed some of the most 
modern digital switching equipment in the world.

Under the impetus of France Télécom (formally Direction Générale des
Télécommunications - DGT), the most important division of the French
Post Office, France introduced professional videotex services in 1982 and
generalized public videotex services in 1983. Now, all of France receives
videotex services on over 5 million low-cost Minitel terminals. The French
videotex software developed by the DGT has been licensed for use in
many countries, including the United States and Japan.

In 1984 France launched its first telecommunications satellite, Telécom 1,
which has transponders to provide digital communications between businesses 
and analog videoconferencing between France and other countries. Télécom 1B 
was launched in May 1985, but became inoperative at the beginning of 1988. 
Télécom 1C was launched in March 1988.

Second-generation satellites, Télécom 2, are scheduled to be launched.
France has also launched direct broadcasting satellites (TDF). In preparation 
for high-definition television (1,250 lines), compact-disc-quality sound
and simultaneous transmission in all European languages, France and the 
other European countries have developed D2-MAC, which will be the 
transmission standard for the TDF satellites.

There are currently six television channels in France; two are government 
operated (A2, FR3), one has been sold to the private sector (TFI), one is 
a pay channel serving approximately 2 million subscribers (Canal +), and 
two are private stations (La5 and M6). Paris and other major French cities 
are being wired for cable and offer a wide range of programming from other 
European countries.

Space and military

Arianespace, a company held by European companies, is one of the world's 
major commercial rocket launchers. The Ariane-5 rocket will be used to 
launch the Hermes, the European version of the U.S. and Soviet space 
shuttles, assuming EC budgets permit the continuation of this project.

France, one of the world's leading suppliers of arms, sold its highly 
sophisticated military communications systern RITA, to the U.S. military. 
Its supersonic airplanes and armored ground equipment have been purchased 
by numerous countries.

Foreign trade and balance of payments

Successive French governments have attempted to encourage exports and 
reduce imports. Since 1980, however, French exports have declined in most 
sectors, wth the exception of cheese, wine, perfume, and cosmetics. The 
trade deficit was US$14 billion in 1990: France exported over US$206 billion 
of goods, mostly food and agricultural products, business equipment and 
automobiies, and paid over US$220 billion for imports. The single largest 
import was energy. Other major imports were business equipment and chemical 
products. France's principal trading partners for both imports and enports 
are Germany, Italy and Belgium.

In 1991 foreign trade improved significantly due to the industrial sector, 
except for consumer products (textiles, clothing, leather and shoes. and 
jewelry). After four years of economic growth (1987 to 1990), the 
agrobusiness excess has been reduced to F44 billion. France's 1991 balance 
of payments deficit for current transactions was over F33.4 billion, compared 
with a deticit of F53 billion in 1990. Table II [not included] shows the 
change in the balance of trade for the period 1989 to 1991.

Chapter 2   Business environment

Investor Considerations

o Denationalization program has been suspended. 
o Investment aids are available for foreign businesses. 
o Favorable conditions pertain in enterprise and free-trade zones. 
o Significant decrease occurred in industrial investment in the period
  1972-1984; increasing annually thereafter. 
o Reduction in taxes on business is under way. 
o Export incentives are available to foreign-controlled French companies.


Industrial climate

The French economy is a free market system, even more so as a result of 
the recent denationalization and price liberalization programs. The economy 
is being enhanced by further investment in new, efficient technologies, a 
retrained work force and a simplified regulatory scheme.

Following the first oil crisis, industrial investment diminished in France 
for over a decade. Only since 1984 has such investment begun to increase 
annually.

France is one of the world's technological or competitive leaders in a 
variety of manufacturing sectors, including aeronautics and space industries, 
professional electronics, software, telecommunications, trains, nuclear 
energy, and chemicals (see Chapter 1).

Framework of industry

In 1982 the socialist government nationalized and reorganized leading 
French companies (e.g., Thomson, Saint-Gobain, Rhône-Poulenc,
Péchiney, and Companie Générale d'Electricité). This program was
reversed four years later under the conservative government, see 
"Political system" in Chapter 1, but was suspended by the Rocard government
(see below).

Family-held enterprises continue to be an important part of the French
industrial structure, but, increasingly, companies are going public.

Aims of government policy
Economic development plans
Since World War II, successive governments have introduced five-year
plans that define economic objectives. The economic situation was favorable 
when the Tenth Plan was initiated despite the Stock Exchange crisis
in 1987. Economic growth was steady and inflation decreased.

The Plan establishes a strategy of large-scale industrial reemployment. 
The objectives of the Plan are as follows.

o Growth in competitiveness.
o Adaptation to the European market.   
o Preparation to confront increased competition.
o Education and employee training.
o Research and development. 

Denationalization 
In 1986 the conservative government of Prime Minister Jacques Chirac 
detailed its denationalization plan for more than 65 state-owned or 
controlled banks and financial institutions, industrial and insurance 
companies, and one telecommunications company. Before the suspension of 
denationalizations in early 1988 (see "French economy" in Chapter 1), the 
government raised almost F71 billion from the sale of shares. The last 
group to be denationalized during this period was Matra.

The present policy of halting denationalizations does not mean that 
nationalized companies are maintaining a status quo. There is significant 
activity in the buying and selling of subsidiaries and divisions so as to 
consolidate and increase economic and industrial strength to be more 
competitive in the EC and other world markets.

Regional and special industry development

The French government, through the Délégation à I'Aménagement du Territoire 
et à I'Action Régionale (DATAR), actively promotes foreign investment in 
France. Aid is available for industries setting up in most parts of western 
and southern France, including Corsica, and in some  traditionally industrial 
areas of the north, east and southwest. Both subsidies and grants are 
available. In addition to its head office in Paris,  DATAR has branch offices 
in the United States, Japan and certain Euro pean countries. (For further 
information, see Chapter 4.)

Enterprise zones

There are three enterprise zones. Businesses establishing therein are  
eligible for tax holiday benefits. See Chapter 4 for details.

Free-trade zones

There are two free-trade zones offering duty-free imports. See Chapter 4  
for details.

Financial services

The French government provides some special financial services to  
industry in the form of export loans, credits and insurance. See Chapter 4
for details.

Public-private sector cooperation

There are no special legal vehicles for cooperation between the public 
and private sectors. However, in 1988, for nonmilitary, high-tech research 
and development, the government contributed 54 percent of the total F130 
billion, approximately the same amount spent in the United States and 
United Kingdom, but much lower than that spent in Japan and West Germany, 
and private enterprise contributed the balance.


Labor-management relations

The labor force is, in general, educated and highly trained. Managerial 
talent and skilled and unskilled labor are readily available, particularly 
given the high rate of unemployment. Businesses won a significant battle 
when the government eliminated the prior authorization procedure for 
discharges (see "Termination of employment" in Chapter 10).

It is estimated that approximately 10 percent of the labor force is unionized. 
There is a noticeable decrease in social conflicts and the influence of 
labor unions has decreased in the last decade. Due in part to the  closing 
of a large number of industrial companies, the Confédération Générale des 
Travailleurs (CGT) has lost approximately one-third of its members in the 
last ten years. With its decline in membership, it has lost some ofits 
former influence. (Also see "Unions" in Chapter 10.)

lmplications of European Community membership

One of the major achievements of the EC was to establish a common customs 
and tariff system for the EC member countries. Until 1992 countries that 
consider that their economies are being affected by dumping can petition 
the Commission for a temporary halt to the imports in question. At the end 
of January 1988 France and the Netherlands were authorized by the Commission 
to stop the import of color televisions from Hong Kong having 60 percent 
Japanese-origin components. After 1992 the protective rights of individual 
EC countries will be substantially reduced. For further information regarding 
EC institutions and policy, see the Price Waterhouse Information Guide "Doing 
Business in the European Community".

Overseas trade relations
Membership in trade blocs

France is a member of the EC (see above) and the Organization for 
Economic Cooperation and Development (OECD), and is a signatory to the
General Agreement on Tariffs and Trade (GATT). To the extent that France
is a member of both the EC and GATT, its ability to impose customs barriers 
or other impediments to free trade is significantly reduced (see above) .

Exports

Seventeen percent of French exports are classed as high-technology goods 
and France holds 7 percent of the global market in such goods. Foreign-
controlled campanies based in France are entitled to receive the same 
export incentives as French companies. There are two main programs, both 
of which are based on tax considerations and depend upon prior administrative 
approval. (See Chapter 4 for more information.)

Imports

Over the past ten years France has witnessed a trend of Increasing imports. 
This trend has been reinforced by the strength of the franc. In 1975 22 
percent of the goods on the French market were of foreign origin whereas 
in 1988 that percentage reached nearly 42 percent.

Trade barriers

Trade barriers within the EC are being eliminated (see above). Other trade 
considerations are discussed in Chapter 8.

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Table of contents (only main titles are shown here)

1   France, a profile
2   Business environment
3   Foreign investment and trade opportunities
4   Investment incentives
5   Restrictions on foreign investment and investors
6   Regulatory environment
7   Banking and finance
8   Exporting to France
9   Business entities (corporate forms)
10  Labor relations and social security
11  Audit requirements and practices
12  Accounting principles and practices
13  Tax system
14  Tax administration
15  Taxation of corporations
16  Taxation of foreign corporations
17  Taxation of shareholders
18  Taxation of foreign operations
19  Partnerships and joint ventures
20  Taxation of individuals
21  Taxation of trusts and estates
22  Value-added tax
23  Other indirect taxes
24  Tax treaties
25  Introduction to Price Waterhouse
    Appendices

The first chapter describes briefly the Legal System with
subtitles: Civil law, laws and regulations, court system 
and legal profession.  This is included along with a short 
survey of the French business environment in the file DO_BIZ,
available from Law-France.


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