ECONOMIC ENVIRONMENT OF FRANCE

Name of the student ANJUL SINGH PRIYANKA MUNJAL SARIKA DHAR SUMIT KUMAR RAUT BIKAS SHARMA JYOTI PUNJ PRAKASH

PG Roll No:

PG 20112079 PG 20112004

Submitted to Subject Submitted on Marks Allotted Remarks(if any)

Name of Faculty GME 21-12-2011 For use of Faculty For use of Faculty

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INTRODUCTION ABOUT FRANCE

France is the one of the largest country in Europe, bordered by six countries; Belgium, Luxembourg and Germany to the north-east, Switzerland and Italy across the Alps to the south-east and Spain across the Pyrenees to the south-west. The UK is across the English Channel. France is a unitary semi-presidential republic in Western Europe. It has several overseas territories and islands located on other continents. Metropolitan France extends from the Mediterranean Sea to the English Channel and the North Sea, and from the Rhine to the Atlantic ocean. It is the largest European country. It possesses the second largest exclusive economic zone in the world, covering 4,260,000 square meters, just behind the United States. France has been a major power with strong cultural, economic, military and political influence in Europe and around the world. During the 17th and 18th centuries, France colonized great parts of North America and South Asia. During the 19th and early 20th centuries, France built the second largest colonial empire of the time, including large portions of north, west and central Africa, southeast Asia, and many Caribbean and pacific islands. France has its main ideals expresses in the declaration of the rights of man and of the citizen. The French republic is defined as indivisible, secular, democratic, and social by its constitution. France is one of the most in this world. It is the worlds fifth largest economy in terms of GDP, 9TH largest economy in terms of purchasing power parity and is second largest economy measured by nominal GDP in Europe. France is the wealthiest European nation and the worlds fourth nation in terms of aggregate household wealth. France enjoys a high living standard as well as a high educational level and also one of the highest life expectancies in the world. It is listed as the worlds best overall health care by the World Health Organization. It is the worlds most visited country, receiving 82 million foreign tourists annually.

HISTORY
France was one of the earliest countries who progress from feudalism to the nation-state. Its monarch were surrounded themselves with capable ministers, and French armies were among the most innovative, disciplined and professional. During the region of Louis 14th (16431715), it was the dominant power in Europe. During the First World War France faced great losses of troops and material. France established an elaborate system of border defense and alliances to offset resurgent German strength. France was defeated early in world war-2, however, and was occupied in June, 1940. That July, France was divided into 2 parts: one part being ruled directly by the Germans and other controlled by the French (Vichy France) and which the German did not occupy. German and Italian forces occupied all France including Vichy zone. The Vichy government largely acquiesced to German plans, under the name of Plunder of French.
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Economically, a full one-half of Frances public sector revenue was appropriated by Germany. After 4 years of occupation and strife, allied forces liberated the France in 1944. France emerged from Second World War to face a new problem. After a short period of provisional government initially led by Gen. Charles de Gaulle, the fourth Republic was set up b a new constitution and established as a parliamentary with the mixed nature of the coalitions and a consequent lack of agreement caused successive cabinet crises and changes of government. Finally, on May 13, 1958, the government structure collapsed as a result of the aggressive opposing pressures generated by 4 years of war with Algeria. Making the beginning of 5th republic, General de Gaulle became prime minister in June 1958 and was elected president in the same year. Algerian conflicts changed the composition of French society. Seven years later, the people of France went to the polls to elect a president by directly ballot for the first time in the 20th century. De Gaulle won re-election with a 55% share of the vote, defeating Francois Mitterrand. In April 1969, Gaulles government conducted a national referendum the creation of 21 regions with limited political powers. The governments proposals were defeated, and de Gaulle subsequently resigned. After that Gaullist Georges Pompidou (1969-74), independent republican Valery Giscard dEstaing (1974-81). Socialist Francois Mitterrand (1981-95), Neo- Gaullist Jacques Chirac (1995-2007), and center- right Nicolas Sarkozy (2007-present) become president.

DEMOGRAPHIC
Nationality: French POPULATION As of January 2011, the total population of France was 65,821,885 in the French republic. 63,136,180 of these in metropolitan France and 2,685,705 was in French overseas departments and territories. The population growth rate of France is 0.5%. The Age structure of France 0-14 15-64 65 years over Percentage 18.5% 64.7% and 16.8% male 6,180.905 21,082,175 4,578,089 female 5,886,849 21,045,867 6,328,834

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ETHNIC GROUPS The modern ethnic French are the descendants of Celts, Lberians, Ligurians and Greeks in Southern France. Later mixed with large group of Germanic peoples arriving at the end of the Roman Empire such as the Franks the Burgundians, Alamanni and Goths, Very small portion of Moors and Saracens in the South, and Scandinavians, Vikings who became by the mixing with the local population, the Normans and settled mostly in Normandy. RELIGIONS There are various region like;      Roman Catholic Protestant Jewish Muslim Unaffiliated 83%-88% 2% 1% 5%-10% 4%

Overseas department- Roman Catholic, Protestant, Hindu, Muslim, Buddhist, Pagan LITERACY There is a great literacy percentage in France, which indicates that France is developed country. 99% of the total population of France who is 15 years old and above can read and write. In which 99% are men and 99% of women. HEALTH Infant mortality rate (Jan, 2011) 3.7/1000 WORKFORCE (2009)     28.3 million (Preliminary) services 75% industry and construction 21.7% agriculture- 2.9%

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GEOGRAPHICAL
LOCATION & CLIMATE Metropolitan France: western Europe, bordering the bay of Biscay and English Channel, between Belgium and Spain, Southeast of the UK, bordering the Mediterranean Sea, between Italy and Spain & climate are Generally cool winters and mild summers, French Guiana: Northern South America, Bordering the North Atlantic Ocean, between Brazil and Suriname & climate are Trophical, Hot, Humid, Little seasonal temperature variation Guadeloupe: Carubbean, islands between the Caribbean Sea and the North Atlantic Ocean, Southeast of Puerto Rico & climate are Subtrophical tempered by trade winds, moderately high humidity, rainy season Martinique: Caribbean, island between the Caribbean Sea and North Atlantic Ocean, North of Trinidada and Tobago and climate are Subtrophical tempered by trade winds, Moderately high humidity, Rainy season Mayotte: Southern Indian Ocean, island in the Mozambique Channel, about half way between northern Madagascar and northern Mozambique and climate are Trophical, marine, hot humid, rainy season during monsoon Reunion: Southern Africa, island in the Indian Ocean, East of Madagascar and climate are Trophical but temperature moderates with elevation, cool and dry, hot and rainy NATURAL RESOURCES Metropolitan France: coal, iron, ore, bauxite, zinc, uranium, antimony, arsenic, potash, feldspar, fluorspar, gypsum, timber, fish French Guiana: gold deposits, petroleum, kaolin, niobium, tantalum, clay NATURAL HAZARDS Metropolitan France: flooding, avalanches, midwinter windstorms, drought, forest fires in south near the Mediterranean Overseas departments: Hurricanes, flooding, volcanic activity

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ECONOMIC SITUATION
France is the fifth largest economy by nominal figures and ninth largest economy by PPP figures. Its second largest economy in Europe in nominal figures and third largest economy in PPP figures. ECONOMIC HISTORY France economy entered the 2008-2009 recessions later and left it earlier than most comparable economies, only enduring four quarters of contraction. Between January and March 2011 Frances GDP growth has been stronger than expected at 0.9%. France has long been part of worlds wealthiest and most developed national economies. CURRENT ECONOMIC SITUATION As of 2010, France is worlds fifth and Europes second largest national economy by nominal GDP. In 2010 global wealth report ranks France the wealthiest European with 2.6 million dollar millionaires in aggregate household wealth. According to IMF in 2010, France is worlds 18 country by GDP per capita with $40591 per inhabitant. In 2010 France was listed 14 on the UN Human development Index with 0.872 and 25 on the corruption perceptions index. FRANCE WORLDS LEADING CORPORATIONS French companies are ranking as leading firms in each and every major economic sector. AXA is worlds largest insurance company, Air France is worlds largest airline company in income , Loreal is worlds biggest cosmetic company, EDF is the worlds largest utility company, Areva is biggest nuclear energy leader. ECONOMIC INDICATORS The international financial crisis of 20019 led France into a recession, the French economy shrinking by 2.5%. The country has nonetheless resisted this development better than the Eurozone average, thanks to a more diversified economy, a more solid banking system, as well as a massive stimulus plan. The GDP improved in 2010 with a growth estimated at 1.6% which should remain on this low level through 2011. The recovery was essentially driven by resumption of international trade. The government priority is restoration of public finances through a policy of budgetary restraint. Due to crisis the unemployment rate which is estimated at 10% in 2010 has reached its highest level in 10 years.
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MAIN SECTORS OF ECONOMY France is biggest agricultural power in European Union, accounting for a quarter of its total agricultural production and second agricultural power in world after United States. France manufacturing industry is varied, country is in the middle of undergoing a de-industrialization process which translates into numerous relocations. The tertiary sector represents three fourth of the worlds GDP and employees about 75% of the workforce. France is major tourist destination in the world with more than 75 million tourists visiting every year. FOREIGN TRADES France is one of the 10 leading exporters in the world, export accounting for more than 50% of countrys GDP. In 2009 , under the effect of economic recession, both exports and imports decreased. Exports rebounded in 2010 with resumption of Asian trade and imports have risen dramatically in response to upturn in activity.

Sales

Agriculture Industry Service

MAIN CUSTOMERS(% OF EXPORTS) GERMANY ITALY SPAIN BELGIUM UNITED KINGDOM OTHER PARTNERS MAIN SUPPLIERS(% OF IMPORTS) GERMANY BELGIUM ITALY CHINA SPAIN OTHER PARTNERS

2009 14.9% 8.5% 8% 7.6% 7.3% 53.8% 2008 16.4% 8.5% 8.1% 6.5% 6.5% 53.9%

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CURRENT ECONOMIC SITUATION:

 French economy ended last year with GDP growth of 1.4% and kicked off 2011 with
a vigorous start. The resilience of private consumption and limited size of manufacturing sector has been considered shields guarding the French economy through global economic crisis.

 The countrys high exposure to debt in weak euro zone economies and chronically
high joblessness are said to hinder the recovery of French economy not to mention the weaker external demand from its neighbors.

 France resilient

domestic demand will remain the major stimulus to growth. The fading of recovery measures such as one off social transfers and a car scrapping premium, along with the weaker external demand is going to moderate manufacturing activities and business investment, coupled with high inflation and expected increase in labor force after the general pension reform and cancellation of exemptions to job search obligation, will set to add pressure to labor market and subsequently consumer sentiment.

 To complicate matters, the European sovereign debt will continue to cast dark clouds
over Frances growth outlook. In all, France is forecast to end this year with GDP growing 1.7% and next year with a lower estimate of 1.4%.

TRADE POLICY
France is a member of European union and it follows common external trade policy and measures .As a euro zone member it has also adopted the euro as its legal tender 1 January 2002.

RECENT DEVELOPMENT
 As France is a member of European Union, its trade relations with Hong Kong /the Chinese mainland are affected by European Union common external trade policy and measures. As a euro zone member it has also adopted the euro as its legal tender from 1 January 2002.  Upon the expiry of textile safeguard quotas by end of 2007, a joint system with china had been established to monitor European Union imports of Chinese textiles and apparel which was scheduled to operate for 1 year, covering 8 out of 10 previously restricted categories. Starting 1 January 2009 textile and clothing products originating in china no longer require any import license before entering European Union.  The European Union new scheme on generalized system of preferences entered into effect on 1 January 2009 and will remain in force until 31 December 2011.While the Chinese mainland remains a beneficiary certain products like textile, jewelry will be excluded from preferential treatment.
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 A number of Chinese mainland origin products are subject to anti-dumping duties, including bicycles, which are interest of Hong Kong exporters.  The stock of French direct investment amounted to US $3.1 Billion as at the end of 2009.  Given the countrys high exposure to euro zone debt, growth of French economy is expected to be softer in the balance of this year and 2012. High unemployment compiled with rising inflammatory pressure will continue to weigh on consumption while weaker external demand will drag down exports.  Against this backdrop, France is forecast to end this year with GDP growing 1.7% and next year with a low estimate of 1.4%.  France is in the midst of transition, from a well to do modern economy that has featured extensive government ownership & intervention to one that relies more on market mechanism.  The socialist let gout has partially or fully privatized many large companies, banks, & issuers but still remains controlling stakes in several leading firms. The telecommunications sector is gradually being opened to competition.  France leaders remain committed to a capitalism in which they maintain social equity by means of laws, tax policies and welfare.  The current government has lowered. Income taxes & introduced measures to boost employment. At end of 2002 the government was focusing on the problems of high cost of labor & labor market inflexibility resulting from 35 hours workweek and instructions on layoffs. The government has also pushing for pension reforms & simplification of administrative procedures.  The tax burden remains one of the highest in Europe. The current economic slowdown and inflexible budget items have pushed the deficit above EUs 3% debt limit. Business investment remains liters because of low rates of capital utilization on, high debt & steep cost of capital.

TRADE
 France is second largest trading nation in Western Europe. France ran a$68 billion trade deficit in goods in 2010. Total trade in goods for 2010 amounted to $1.109 trillion, over 57% of GDP and 61% of which was with other EU 27 countries.  In 2010 US France trade in goods and services totaled software, computers and peripherals, analytical and scientific instrumentation are particularly attractive to French importers. Total French trade of goods and services was $1.276 trillion in 2009.  Principal French exports to United States are aircraft, engines, cosmetics and luxury products.

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TRAVELLING
 The US department of states consular information program advisor American travelling and residing abroad through country specific information, travel alerts, travel warnings.  Country specific information exists for all countries and includes information on entry and exit requirements, currency regulation, health conditions and consulates abroad.

ECONOMIC OUTLINE      
France continues to play an important role in Africa, especially in its former colonies, through aid programs, commercial activities .military agreements and cultural impact. The Sarkozy government announced change in its sub Saharan African policy shortly after it came to power intending to modernize and rationalize relations in a future oriented manner. Economic minister Christine had said that reducing budget deficit would help ensure sustainable growth with structural reforms helping offset the recessionary effect of budget cuts. The government aims to continue budget cuts through civil servants. Budget spending is set to increase 0.8% per year between 2011 and 2014 compared to 2.5% per year between 2009 and 2010. The government target for the budget deficit is 3% of GDP for 2011 and 4.6% of GDP for 2012. In 2008 in a move to make France more competitive the national assembly passed 4 bills introduced by French government to modernize the reform in labor market.

BUSINESS ENVIRONMENT AND OPPORTUNITIES

BUSINESS ENVIRONMENT 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 organization success. FRENCH CULTURE  Centralization- France has a long and notable history of centralization 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, centralization exists in the concentrated authority that generally lies with one individual.
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 Individualism and individuality-Frances distinguish individuality is an important cultural characteristics 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 in the France, but refers to having a separate but equal sense of place in society. Individualism in the French business environment means that 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. DOING BUSINESS IN FRANCE 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 agriculture and industrial products. The country also demonstrates one of the highest rates of economic growth in Europe. However, for those organizations wishing to enter the French business environment, an understanding of the countrys culture is a vital skill for your company to possess. WORKING PRACTICES IN FRANCE  Arriving for the business appointments 10-15 minutes after the scheduled time is not uncommon, but you should always aim to arrive at the stated time. If you cannot, you will be expected to call them to let them know.  Generally speaking in French business culture, deadlines are open to negotiation but this is fast changing as French businesses more Anglo-Saxon business practices and stricter attitude to time.  Business organization in France are highly organized and well structured. Rules and administrative practices tend to be favored over flexibility, particularly in the public sector. STRUCTURE AND HIERARCHY IN FRENCH COMPANIES  There exists a strong, vertical hierarchy in French business culture which respects the Cartesian way of thinking. Working with all levels of the business organization will ensure your success.  In French business culture, the highest individual in authority still tends to be the only one who can make the final decision.

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WORKING RELATIONSHIPS IN FRANCE  The French have an inherent sense of privacy exhibited in their definite distinction between business and personal life. Dont expect to be invited out in the evenings after work as most people will go home to their families.  Relationships are an important part of French business culture, and you will often spend a few minutes getting to know your colleagues before discussing business. 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 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.  Despites the formality of French business culture, it is not uncommon parties to stray from the agenda during meetings. Initial meetings are often dedicated to information sharing and discussion, rather than reaching final decisions. BUSINESS ENVIRONMENT AND MARKET OPPORTUNITIES  Ranking of business environment attractiveness, compared to 81 other countries.  Evaluation of policies towards private investment, competition, foreign trade and exchange controls, taxes, infrastructure, financing and labor market issues.  Discussion of medium-term market opportunities and changes in demographics and consumer markets. BUSINESS OPPORTUNITIES India France trade relations are a common forum of India and France chamber of commerce and industry. The federation of Indian Chamber of Commerce(FICCI) and UBIFRANCE the agency for international business development, under the ministry of economy, Finance and industry, France, are the prime facilitators of trade and business between each other. FICCI and UBIFRANCE represent the trade and business community of their respective countries. India France trade relations aim at facilitating better India and European Union trading relation. Further, their common goal is to double India France relations and business value within 5 years. India France trade relations are focused on improvements of trade and business relations along the following line: India and France Trading Policies India and France Trading procedures India and France Trade Contracts
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India and France Administrative and Regulatory Procedures India and France Trade and Investment Opportunities India France Business Networking French investments in India during the last 15 years have brought US$ 1.76 billion into Indian market. The India France trade relations facilitated business to the tune of US$ 6.2 billion during 2005-2006. A number of French companies have ventured into the Indian market as an outcome of better India France trade relations. The sectors that have attracted the most FDI from France are: Electrical Equipment Services Sector Telecommunications Transportation Industry Fuels Chemicals Food Processing Industries Cement Glass Further, scope of investment and development of trade and business among India and France lies in areas like: Small and Medium Enterprises Manufacturing Information Technology Pharmaceuticals Environment Aeronautics Life Science India France trade relations further aim at forgoing ties for the development of the Agribusiness and Food-processing Sector. The Indian Food-processing Sector produces around 50 million tons of fruits and 90 million tons of vegetables. But inadequate food processing infrastructure in India could only process 6% of the perishable products available in India. The Indian Agribusiness and Food Processing Sector aims to increase the percentage of processed food available in India to 20% over the next 10 years. A huge future demand for processed food is expected with changing socio-economic situations. The government of India's Mid-day Meal program for primary school children is another prospective area of Agri and Food Processing Industry. The Processed Food Sector in India offers tremendous scope in organized street food business. Moreover, India France trade relations envisage investment in the environment sector as well. France's expertise in this sector is well acclaimed throughout the world, especially its success in implementing clean development Mechanism projects according to the Kyoto Protocol for reducing emission levels of greenhouse gases.

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India France trade relations is also keen to focus on other areas for the development of trade and business, likeBusiness travelers Professionals Student Tourism Easing visa norms Agreement of French Agricultural Ministry and Indian Export Inspection Council (EIC) for export of Indian fisheries and agricultural products. Investment in financial and retail market in India Promotion of Indian Whiskey amongst the European countries A further objective of better India France Trade Relations could be utilizing France's economic and business leadership for entering into European market through different trade agreements France had entered into with its Europeans business partners.

MARKET CHALLENGES Government economic policy aims to promote investment and domestic growth in a stable fiscal and monetary environment. Creating jobs and reducing the high unemployment rate through recovery-supportive policy has been a top priority. The unemployment rate in metropolitan France slipped to 7.4% in the fourth quarter of 2008. Unemployment is expected to increase in 2009. Despite significant reform and privatization over the past 15 years, the government continues to control a large share of economic activity: Government spending, at 53% of GDP in 2007, is among the highest in the G-7. Regulation of labor and product markets is pervasive. The government continues to own shares in corporation in a range of sectors, including banking, energy production and distribution, automobiles, transportation, and telecommunications. Legislation passed in 1998 shortened the legal workweek from 39 to 35 hours for most employees effective January1, 2000. Recent assessments of the impact of workweek reduction on growth and jobs have generally concluded that the goal of job creation was not met. The former administration under president Chirac introduced increasing flexibility into the law. Under president Nicolas Sarkozys impetus, overtime work is exempted from income taxes and payroll taxes as of October 1,2007 ,a move to encourage work and to increase work time. The business community welcomed government efforts to change the 35 hour workweek, but has complained that measures are difficult to implement. The government is taking measures to make the law less rigid and is seeking to introduce more flexibility in employment contracts.

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MARKET OPPORTUNITIES Leading non-agricultural products considered to offer "best prospects" for U.S. business in France are (in order of market size): Travel and tourism, aircraft and parts, safety and security Equipment, computer services, computer software, Industrial chemicals, computer and peripherals, telecommunications equipment, water resources equipment and services, medical equipment, automotive parts equipment, plastics, cosmetics, education services, textile, direct marketing and E-commerce business to consumer. The French market for food products is mature, sophisticated and well served by suppliers from around the world. Additionally, increasing interest in American culture, younger consumers and changing lifestyles are contributing to France's import demand for food products from the United States. Generally, high quality food products with an American image can find a niche in the French market, particularly if they can gain distribution through stores and supermarkets that specialize in U.S. or foreign foods. Significant market opportunities for consumer food/edible fishery products exist in a number of areas: fruits juices and soft drinks(including flavored spring waters), dried fruits and nuts, fresh fruits and vegetables(particularly tropical and exotic), frozen foods (both ready to eat meals and specially products), snack foods, tree nuts, "enthic" products, seafood(especially salmon and surimi),innovative dietetic and health products, organic products, soups, breakfast cereals and pet foods and treats. In addition, niche markets exist in France for candies, chocolate bars, wild rice and kosher foods that have shown rising demand. Market opportunities for U.S. exporters for oilseeds, protein meals and other feeds, as well as for woods products and grains. REFERENCES http://www.communicaid.com/cross-cultural-training/culture-for-business-andmanagement/doing-business-in/French_business_culture.php http://www.globaltrade.net/international-trade-importexports/f/business/text/France/Trade-Policy-Market-Overview-3.html?folderId=1271 http://dare.co.in/strategy/going-global/doing-business-in-france.htm http://www.heritage.org/index/country/France http://www.state.org

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