Identifier
Created
Classification
Origin
07PARIS232
2007-01-22 12:35:00
UNCLASSIFIED
Embassy Paris
Cable title:  

FRANCE 2007 INVESTMENT CLIMATE STATEMENT

Tags:  EINV EFIN ELAB PGOV KTDB OPIC USTR FR 
pdf how-to read a cable
VZCZCXRO4467
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHFR #0232/01 0221235
ZNR UUUUU ZZH
R 221235Z JAN 07
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 4318
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUCPCIM/CIMS NTDB WASHDC
RUCNMEM/EU MEMBER STATES
RUEHFT/AMCONSUL FRANKFURT 6055
UNCLAS SECTION 01 OF 20 PARIS 000232 

SIPDIS

SIPDIS

PASS FEDERAL RESERVE
PASS OPIC
PASS USTR
STATE FOR EB/IFD/OIA, EUR/WE
TREASURY FOR DO/IM SOBEL, RHARLOW, LHULL
TREASURY ALSO FOR DO/IMB AND DO/E WDINKELACKER
USDOC FOR 4212/MAC/EUR/OEURA

E.O. 12958: N/A
TAGS: EINV EFIN ELAB PGOV KTDB OPIC USTR FR
SUBJECT: FRANCE 2007 INVESTMENT CLIMATE STATEMENT

REF: 06 STATE 178303

PARIS 00000232 001.2 OF 020


UNCLAS SECTION 01 OF 20 PARIS 000232

SIPDIS

SIPDIS

PASS FEDERAL RESERVE
PASS OPIC
PASS USTR
STATE FOR EB/IFD/OIA, EUR/WE
TREASURY FOR DO/IM SOBEL, RHARLOW, LHULL
TREASURY ALSO FOR DO/IMB AND DO/E WDINKELACKER
USDOC FOR 4212/MAC/EUR/OEURA

E.O. 12958: N/A
TAGS: EINV EFIN ELAB PGOV KTDB OPIC USTR FR
SUBJECT: FRANCE 2007 INVESTMENT CLIMATE STATEMENT

REF: 06 STATE 178303

PARIS 00000232 001.2 OF 020



1. Investment Climate Statement

Contents


A. French Investment Regime

A1. Openness to Foreign Investment
A2. Conversion and Transfer Policies
A3. Expropriation and Compensation
A4. Dispute Settlement
A5. Performance Requirements and Incentives
A6. Right to Private Ownership and Establishment
A7. Protection of Property Rights
A8. Transparency of the Regulatory System
A9. Efficient Capital Markets and Portfolio
Investment
A10. Political Violence
A11. Corruption


B. Bilateral Investment Agreements


C. OPIC and Other Investment Insurance Programs


D. Labor


E. Foreign Free Trade Zones/Ports


F. Foreign Investment Statistics




A. French Investment Regime

Ensuring that France's investment climate is
attractive to foreign investors is a stated priority
for the French government, which sees foreign
investment as a way to create jobs and stimulate
growth. The 2005 debate in France over Qeconomic
patriotismQ caused some observers to question the
depth of this commitment. Nevertheless, 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 Q 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, good
infrastructure, technology, and central location in

Europe. EU membership, which mandates the free (with
certain limitations) movement of people, services,
capital and goods across the European Union, took on
even greater significance with the introduction of
Euro coins and bills in January 2002. However,
despite considerable economic reform and market
liberalization over the past decade, U.S. and foreign
companies often point to high payroll and income
taxes, over-regulation, rigid labor markets and
occasional negative attitudes toward foreign
investors as disincentives to investing in France.

A1. Openness to Foreign Investment

The Formal Investment Regime

The formal French investment regime remains among the
least restrictive in the world. While there is no
generalized screening of foreign investment,
legislation passed at the end of 2005 dictates that
acquisitions, irrespective of size or nationality,
involving QsensitiveQ sectors are subject to prior
approval by the Finance Minister
([http://www.legifrance.gouv.fr] Q search for the 31
December 2005 French Official Journal, decree 2005-

PARIS 00000232 002.2 OF 020


1739 of 30 December 2005). For investors from non-EU
countries (or those who are not members of the
European Common Market that have signed an
administrative convention with France),protected
sectors include: gambling activities, private
security services, research, development or
production of chemical or biological medicines,
equipment for intercepting communications or
eavesdropping, security services for computer
systems, dual-use (civil and military) technologies;
cryptology, firms that are repositories of defense
secrets, firms that research, produce and sell

SIPDIS
military equipment, and lastly any other industry
supplying the defense ministry any of the goods or
services described above. The EU Commission has said
it would study the December 2005 decree to ensure it
is consistent with European Community law.

The decree also changes the triggers for Government
of France (GOF) investment scrutiny for firms in the
sensitive sectors. The prior decree required the GOF
to review a proposed investment if it was above the
threshold of 33% of the outstanding shares or voting
rights. Now, the decree states that any investment
that grants control of a firm, or surpasses the 33%
threshold, or involves any part of any branch of any
firm that has established headquarters in France, is
subject to GOF review.

Authorities also consider the place of residence
rather than the nationality of a potential investor.
The place of residence of a corporate investor is
determined by the location of its owners, without
regard to place of incorporation. While firms owned
or controlled by American citizens that are legal
residents in an EU country will usually be considered
as EU residents, France will normally consider firms
established or incorporated in other EU countries,
and owned or controlled by American residents as non-
EU residents.

To determine if non-EU investors control a firm, the
French government looks at the residency of the
headquarters (Qsiege socialQ) and the ability of non-
EU investors to veto key management decisions or
commercial ties (such as loans, guarantees, options,
licenses, or contracts) that might effectively make
the French company dependent on foreign investors.
Firms with questions about their residency status
should contact the Office of Foreign Investments at
the following addresses:

Ministere de l'Economie, des Finances et de
l'Industrie,
Direction Generale du Trisor et de la Politique
Economique:

Multicom 2 - Services, Investissements et Propriete
Intellectuelle
139, rue de Bercy
75012 Paris, France
Tel: (33)1 44-87-72-87

Service du Financement de L'Economie
FINENT 1 Epargne et Marchi Financier
139, rue de Bercy
75012 Paris, France
Tel: (33)1 40-04-04-04

Agence des Participations de lQEtat
139, rue de Bercy
75012 Paris, France
Tel: or (33)1 40-04-04-04

AFIIQs website
(http://www.investinfrance.org/NorthAmerica in
English) explains the basic regulations covering
foreign direct investment. It provides a general
framework on legal issues to help businesses in its
"Doing Business in France" section. The website of
the Paris Chamber of Commerce and Industry provides

PARIS 00000232 003.2 OF 020


French summaries of regulations applicable to foreign
direct investment: (http://www.inforeg.CCIP.fr).

Informal Impediments to Foreign Investors

The January 1, 1999 introduction of the Euro as the
single currency of the European Monetary Union (EMU),
including France, has increased the competitive
pressures on France to improve its domestic business
and investment climate in order to promote growth and
create new jobs. In addition, France has responded
to a more competitive international investment
climate by implementing some market-oriented economic
reforms that increase the attractiveness of the
French economy to foreign investors, and by offering
a variety of investment incentives. Foreign
investors also say they are attracted to France by
its central location in Europe, highly skilled labor
force, and good infrastructure. France is closing
the gap with the U.S. and some other European
countries in personal computer use and Internet
access.

Yet, while today's foreign investors face less
interference than before, after more than a decade of
reforms, France has not entirely overcome a
traditional preference for state intervention and a
sometimes-reflexive opposition to foreign investment.
In some cases, this can be seen in labor organization
opposition to acquisitions of French businesses by
U.S. firms, often reflecting a perception that U.S.
firms focus on short-term profits at the expense of
employment. In other cases, French firms have stated
a preference for working with French and European
rather than U.S. firms. A degree of opaqueness in
the privatization process (see below) can also
aggravate suspicions about the equal treatment of
foreign investors in publicly held firms.

The process of deregulation is far from complete and
the state remains very involved in economic life.
There is extensive regulation of business and labor
markets. Also, the corporate tax rates are high in
comparison to other leading industrial countries.
Foreign investors most often cite complicated and
pervasive labor regulation, high income and payroll
taxes as the greatest disincentives to investing in
France. In the case of labor market regulation, the
impact on companies of the 35-hour legal workweek is
mixed. Many companies used the transition to the 35-
hour workweek as an opportunity to negotiate work-
hour annualization programs with employees that allow
for greater labor flexibility. Companies also
benefited from a further cut in payroll taxes on low
wages. On the negative side, the 35-hour workweek
increased unit labor costs since total wages remained
unchanged even though the number of hours worked
declined. The government is taking measures to make
the law less rigid and is seeking to introduce more
flexibility in employment contracts (See D. Labor).

The French and U.S. business communities initially
described France's new "social modernization law",
passed in July 2001, as creating burdensome new
obligations. The center-right government elected in
2002 selectively implemented the law through its
power to implement by decree. In addition, the
Government introduced a broad range of new investment
promotion and competitiveness measures in 2005.

In making its decision on raising the minimum wage an
average of 3.05% (effective July 2006),the
Government sought to increase purchasing power and
stimulate household consumption. Despite the
increase in the minimum wage, base gross wages in the
private sector are expected to increase at the same
rate compared with last year (2.8%) as the high
unemployment rate restrains wage demands.

The government decision to apply income tax cuts in
2007 should benefit the French economy, making France

PARIS 00000232 004.2 OF 020


a more attractive place for both French and foreign
investment. Tax rates became a campaign issue before
the 2007 presidential elections, and are likely to
continue to divide politicians across the political
spectrum.

The French have two social security taxes, the
"Contribution Sociale Generalisee" (CSG) and the
"Contribution au Remboursement de la Dette Sociale"
(CRDS). U.S. contributors to the U.S. Social
Security system do not pay these taxes. (Based on
the "May 2 2001-377 ordonnance" to apply the 1408/71
EEC regulation, only "individuals who are subject to
income taxes in France and contribute to the French
social security system including health insurance pay
CSG and CRDS". The related "circulaire
d'application" was published in the May 20, 2001
"Bulletin Officiel du Travail, de l"Emploi et de la
Formation Professionnelle"
[http://www.travail.gouv.fr].

On December 8, 2004, the United States amended the
income tax convention between the United States and
France to avoid double taxation and prevent fiscal
evasion; along with the estate and gift tax
convention to avoid double taxation with respect to
taxes on estates, inheritances and gifts
[http://www.treas.gov/offices/tax-
policy/treaties.shtml]. In December 2005, the French
government ratified the two amendments, and they
entered into force on December 21, 2006. The
provisions resolve problems related to the double
taxation of partnerships and estates. The U.S.
Treasury provided a technical explanation in February
2006 [http://www.treas.gov/offices/tax-
policy/treaties.shtml].

English summaries of labor and tax regulations
applicable to foreign companies in France are
available at the AFII's website
[http://www.investinfrance.org/] and at the Paris
Chamber of Commerce and Industries' website
([http://www.inforeg.CCIP.fr] search Qfiches
pratiquesQ).

France's Privatization Program

The former Socialist-led government that took office
in July 1997 returned to the private sector all or
parts of the governmentQs stakes in a number of large
companies, banks and insurance groups. U.S. firms
showed interest in some of these sales. The current
center-right government, elected in 2002, announced
preliminary plans for further privatization, but the
global slump in air transportation and equity markets
put a brake in privatizations through the sale of
shares. In 2003 and 2004 the government reduced its
stakes in large companies such as Air France-KLM (to
44.6 from 54.0 percent),France Telecom (to 42.2 from
54.5 percent),Thales (formerly Thomson CSF, to 31.3
from 33.3 percent),Renault (to 15.6 from 26.0
percent),and Thomson (to 2.0 from 20.8 percent
through TSA). Smaller projects, including the
privatization of SAPRR (Paris-Rhin-Rhone highway
company) and of the electricity company SNET, also
were carried out. In the energy sector, the
government sold shares in EDF and GDF, retaining a
85.3% stake in EDF and a 79% stake in GDF, but
postponed the privatization of the nuclear power
company, Areva. A December 7, 2006 law authorizes
the reduction of the government stake in GDF to
33.33% from 70% to permit the merger of Gaz de France
(GDF) and Suez. The deal is pending. After a long
selection process in 2005, toll-road companies ASF,
APRR and Sanef were privatized in 2006. The
government reduced its stake in Aeroports de Paris to
67.5%. The government still has stakes in Bull and
Safran (renamed after Sagem merged with Snecma),and
controls 1,143 smaller firms in a variety of sectors.
Privatization is an issue for the candidates in the
2007 presidential elections. In public

PARIS 00000232 005.2 OF 020


pronouncements, center-right politicians generally
are supportive of further privatization while
politicians on the left are opposed.

Sales of government interests are conducted either
through market-based public offerings or, more often,
through an off-market bidding process. In both
cases, key decisions are made by the Ministry of
Economy, Finance and Industry on the advice of the
quasi-independent "Commission des Participations et
des Transferts" (formerly known as the Privatization
Commission). Both consider the financial and
business plans submitted by bidders. There is a
strict legal and procedural process regulating these
decisions, but the confidential nature of off-market
sales can raise suspicions about the equal treatment
of foreign versus French bidders. This can have a
chilling effect on foreign investment. In the past,
a policy of selling former holdings to "core"
shareholders in an effort to avoid the splitting-up
of companies or sales of sensitive state assets to
foreign investors also hampered market efficiency and
tended to favor French firms.

When privatizing state-owned firms either through
off-market placements or market-based offerings, the
1993 privatization law gives the French government
the option to maintain a so-called "golden share" to
"protect national interests." This provision is not
targeted at foreign companies and has not been a part
of every privatization process. A golden share gives
the government three legal rights:

-- To require prior authorization from the Ministry
of the Economy, Finance and Industry for any investor
or group of investors acting in concert to own more
than a certain percentage of a firm's capital. The
thresholds would apply to all investors;

-- To name up to two non-voting members to the firm's
board of directors; and

-- To block the sale of any asset to protect
"national interests." Assets could include shares,
but also buildings, technology, patents, trademarks,
and any other tangible or intangible property.

The French Government will have to reconsider its use
of golden shares in future privatization operations
following the June 2002 European Court of Justice's
decision to reaffirm the basic principle of free
movement of capital in the EU. The Court stated that
the use by some EU countries, including France, of
golden shares was a serious impediment to that
principle. Nonetheless, the December 7, 2006 law
related to the energy sector includes the possibility
for the government to keep a golden share in Gaz de
France (GDF) to oppose any measure that might
jeopardize the security of energy supplies. The
Government has also considered retaining a golden
share in the privatization of Areva due to loopholes
in the court's decision. ArevaQs chairman has stated
that the golden share could be consistent with EU
requirements.

French Government Participation in R&D Programs

Total annual R&D expenditures in France represent
2.13 percent of GDP (2005 figures). The French
government (GOF) contributes 0.81 percent of GDP to
R&D and the industrial sector 1.32 percent. The GOF
decided to increase public spending for research by
an additional one billion euros annually from 2005 to

2007. The GOF confirmed in 2006 its intent to
increase total R&D spending to 3 percent of GDP by
2010 (consistent with the EUQs QLisbon agendaQ
goals),with two percent coming from the private
sector. The French government relies on increased
tax credits and incentives for the development of new
investment structures to boost industrial research.


PARIS 00000232 006.2 OF 020


The GOF completed in 2006 an ambitious effort to
reform its R&D strategy, organization, evaluation,
and funding. The new system attempts to inculcate
competition for government-funded research and
embrace the university system. The Research and
Innovation Bill, adopted in April 2006, reinforces
science-industry relations and promotes greater
strategic direction. The new legislation provides
for a High Council for Science and Technology, a
National Research Agency, numerous Qcompetitiveness
clusters,Q and an Industrial Innovation Agency.
Private enterprise will benefit from more flexible
working arrangements with government scientists, as
well as by receiving R&D tax incentives. The GOF
also supports partnerships between public research
agencies and universities within the framework of
QResearch and Higher Education Hubs,Q and QAdvanced
Research Thematic Foundations,Q two new types of
cooperation.

The GOF sponsors R&D and technology development
programs at three different levels:


1. International/European programs (e.g. ESA, CERN,
EUREKA, EU Framework program);


2. Technology development programs in the private
sector (approx. 45 percent of R&D expenditures are
funded by the French government),with specific
programs to encourage transfer of research and to aid
small and medium firms; and


3. National research programs (mostly administered
by the Research Ministry),with specific emphasis
given to health and biotech (fight against cancer,
research on aging and handicaps, focus on new
epidemics, genomics/genetics); resource management
(including food resources, food safety, water
management),sustainable development and the fight
against greenhouse gases (research on new sources of
energy, clean vehicles, energy storage and use of
hydrogen, nuclear systems and nuclear fusion);
information and communication technologies;
nanotechnologies; and space.

The public budget for Higher Education and R&D is
21.6 billion euros in 2007, 3.44 percent above 2006
levels. The 2007 Higher Education and Research
budget by research theme is as follows:

Life sciences: 21 percent
Social and Human sciences: 15 percent
Space/Defense: 14 percent
Math, Physics, Chemistry: 12 percent
Environment: 12 percent
Information and Communication Technologies: 9 percent
Energy: 6 percent
Industrial Production and Technologies: 9 percent
R&D for Developing Countries: 2 percent

For access to R&D subsidies, the French government
provides national treatment to foreign companies
registered in France.

Visas, Work Requirements

The government of France requires that foreign
citizens complete extensive procedures if they wish
to work in France. The requirements are essentially
the same whether foreign citizens work for French or
foreign-controlled firms. Non-EU nationals who
intend to work or conduct any commercial activity in
France must receive a long-term visa and a work
permit (Carte de travail) or business permit (Carte
de commercant - foreign trader's card) before
establishing residence in France. Information can be
obtained from French consulates in the United States.
The web address is [http://www.info-france-
usa.org/intheus/consulates.asp]. For more
information on the foreign trader's card, please
consult the Invest in France agency Web site at:

PARIS 00000232 007.2 OF 020


[http://www.investinfrance.org/France/Living/
Expatriate/?p=formalities&=en]. For more information
on other types of visas and applicable fees, contact
your local Consulate General of France. In addition,
a foreigner's ability to practice a profession may be
curtailed by government regulation and the
regulations of French professional associations. For
example, lawyers seeking to practice in France must
become members of the French bar before they can
practice any type of law under their own names. This
requires passing the bar examination in French. A
number of legislative changes to these regulations
are under consideration.

A2. Conversion and Transfer Policies

All inward and outward payments must be made through
approved banking intermediaries by bank transfers.
There is no restriction on repatriation of capital.
Similarly, there are no restrictions on transfers of
profits, interest, royalties, or service fees.
Foreign-controlled French businesses are required to
have a resident French bank account and are subject
to the same regulations as other French legal
entities. The use of foreign bank accounts by
residents is permitted.

France has little effective foreign exchange control
regulation. For exchange control purposes, the
French government considers foreigners as residents
from the time they arrive in France. French and
foreign citizens are subject to the same rules.
Residents are entitled to open an account in foreign
currency with a bank established in France and to
establish accounts abroad. Residents must report the
account number for all foreign accounts on their
annual income tax returns. French-source earnings
may be transferred abroad.

As part of the international effort to combat money
laundering and the financing of terrorism, France's
banking regulations have undergone several changes,
which affect the handling of checks, as recommended
by the Financial Action Task Force. Additional
changes are expected. France sometimes uses its
powers under national law to freeze assets of
terrorists, operating within EU structures.

A3. Expropriation and Compensation

Under French law, private investors are entitled to
compensation if their properties are expropriated,
and such compensation must be adequate and paid
promptly. In France's bilateral investment treaties,
the French government promises to provide both prompt
and adequate compensation. There have been no recent
disputes involving expropriation of U.S. investments.

A4. Dispute Settlement

There have been few major disputes involving
established U.S. firms in recent years. Government
decisions in investment cases can be appealed to
administrative tribunals and ultimately to the
Council of State (Conseil d'Etat). The rights of
U.S. investors are also protected by the U.S.-French
bilateral convention (see Section B below).

The judicial system is independent. Property and
contractual rights are enforced by the French civil
code. Judgments of foreign courts are accepted and
enforced by courts in France once they have been
"declared executor" by a French judge through
"executor" proceedings (Art. 2123 of the French Civil
Code and Art. 509 of the Civil Procedure Code).
However, in some civil cases and in bankruptcy cases,
foreign judgments are recognized and enforced by
French courts without executor proceedings.

France is a member of the World Bank's International
Center for the Settlement of Investment Disputes

PARIS 00000232 008.2 OF 020


(ICSID Q [http://www.worldbank.org/icsid]). In
addition, in most of its bilateral investment
treaties (BIT's) France has agreed to accept binding
arbitration to resolve investor-state disputes.
However, most of France's BIT partners are developing
countries whose investors have few investments in
France. (See below).

A5. Performance Requirements and Incentives

Investment Incentives

France offers a range of financial incentives to
foreign investors. The following information
reflects incentives as they existed at time of this
writing. The government has a broad range of
investment and competitiveness measures in the
legislative pipeline.

France's domestic planning and investment promotion
agency, DATAR (Delegation a l'Amenagement du
Territoire et a l'Action Regionale) was renamed DIACT
(Delegation Interministerielle a lQAmenagement et la
Competitivite des Territoires) in December 2005. It
has a broad mandate, including increasing the
QattractivenessQ of France for foreign investors and
assisting potential investors. In addition,
financial subsidies and tax incentives are offered at
the local, regional and national government level to
attract investment to France's less affluent areas.
Incentives are available equally to French and
foreign investors and eligibility requirements are
the same.

Within the French government, foreign investment
promotion is the responsibility of the AFII "Invest
in France Mission" headed by an ambassador-at-large,
who is based at the Ministry of the Economy, and
backed up by DIACT. DIACT maintains offices
throughout France and around the world to seek out
and advise potential investors on project
development, site selection, investment incentives
(the largest of which are administered by DIACT) and
administrative and legal requirements. DIACT's
overseas offices were re-named "Invest in France
Agencies" (IFA -- IFANA in North America) in 2001.
There are three DATAR/IFANA offices in the United
States:

Northern and Eastern States

IFANA New York
810 Seventh Avenue, Suite 3800
New York, NY 10019
Tel: (212) 757-9340
Fax: (212) 245-1568

Western and Southern States

IFANA San Francisco
88 Kearny Street, Suite 700
San Francisco,
CA 94108
Tel: (415) 781 0986
Fax: (415) 781 0987

Midwestern States

IFANA Chicago
205 North Michigan Avenue, Suite 3750
Chicago, IL 60611
Tel: (312) 628-1054
Fax: (312) 628-1033

AFIIQs internet address is
[http://www.InvestinFrance.org]. DATARQs site,

[http://www.datar.gouv.fr/] or

[http://www.DIACT.gouv.fr].


PARIS 00000232 009.2 OF 020


The primary investment incentive offered through
DIACT is the Prime d'Amenagement du Territoire (PAT).
DATAR has revised downward the PAT program at the
European Commission's request. Nonetheless, PAT
incentives remain generous for investment in
disadvantaged zones (parts of north and central
France, and Corsica). The government defined a new
list of eligible zones for the 2007-2013 period. The
current PAT system requires job creation from
investors (see Performance Requirements),but its
subsidies can be generous. PAT may also be collected
by firms that maintain employment when the investment
is significant. The system is even more flexible for
small and medium sized companies. New rules will be
issued when the European Commission gives its
approval. Other investment incentives may also be
available. Potential investors should consult DIACT
and AFII to determine the full range of
possibilities, including:

-- Research and development project grants, notably
for businesses located in competitiveness clusters

-- Special tax treatment for company headquarters

-- Local and regional tax holidays and special
subsidies

-- "Industrial conversion" zones featuring tax breaks
and grants for job-creation

-- Special access to credit for small and medium-
sized enterprises

-- Assistance for training, including a portion of
wages paid to employees in training.


Besides DIACT/IFA at the national level, several
French cities and regions have developed their own
investment promotion agencies that advise potential
investors, offer administrative assistance, and
oversee investment incentives. The February 2002
Local Democracy Law ("Democratie de proximite"
(http://www.legifrance.gouv.fr]) gives regional
councils ("Conseils Regionaux") full powers to
establish (without decree or national convention)
schemes for direct aid to companies (subsidies,
reduced interest rates on loans, and advances). Each
"Conseil Regional" has it own website, which can be
found with any internet search engine using "conseil
regional" and the name of the appropriate region.

All incentives are covered under regulations set by
the European Commission.

Performance Requirements

Other than those linked to incentives, there are no
mandatory performance requirements established by
law. However, the French government will generally
require commitments regarding employment or research
and development from both foreign and domestic
investors seeking government financial incentives.
For example, to be eligible for DIACT grants, the
French government usually requires that firms,
whether owned by EU or non-EU residents, create a
minimum of 15 jobs within the first three years. As
noted above, PAT and R&D subsidies are based on the
number of jobs created. In addition, the authorities
have occasionally sought commitments as part of the
approval process for acquisitions by foreign
investors.

Nonetheless, foreign firms need the French
government's approval on a variety of regulatory
issues, and in France, officials generally have much
wider discretion than their U.S. counterparts. This
can leave firms subject to "unwritten" performance
requirements, with regulatory officials making it
known that a firm's request would be more favorably

PARIS 00000232 010.2 OF 020


viewed if it increased employment, R&D, or exports.

A6. Right to Private Ownership and Establishment

The French government maintains legal monopolies in
the following sectors: postal services (La Poste),
national rail transportation (SNCF),Parisian bus and
metro services (RATP),and tobacco manufacturing and
distribution (Altaldis Q former Seita). The
electricity and gas Companies (EDF/GDF) no longer
have monopolies on production, distribution and sale
of electricity and gas. Market opening in Europe has
surpassed 37 percent (by volume) of the electricity
market and 70 percent of the gas market -- meaning
that that proportion of consumers are free to choose
another supplier, although few have. In July 2004,
the option to switch suppliers was opened to all
commercial customers. After a critical piece of
energy sector reform legislation passed that same
month, the first public sales of shares for EDF and
GDF began in 2005, leading effectively to a partial
privatization of the two companies.

A7. Protection of Property Rights

On August 1, 2006, France passed new legislation on
digital copyright(Law on Authors' Rights and Related
Rights in the Information Society) designed to
implement a 2001 EU Copyright Directive as well as
the WTO TRIPS agreement on Intellectual Property.
However, due to the numerous amendments added during
the legislative process, this new copyright law goes
far beyond its original intent. The law strongly
penalizes illegal downloading with a prison sentence
of up to five years in prison and 500,000 euro fine.
However, the new law also mandates interoperability
of digital rights management (DRM) systems by
requiring sellers of online digital content and
manufacturers of digital entertainment devices to
provide information about proprietary DRM
technologies to competitors if this information is
needed to guarantee interoperability. To enforce
that interoperability, the new law establishes a new
Regulatory Authority which has the power to demand
proprietary information from companies. The U.S.
Government has repeatedly expressed concern over this
provision, which could undermine IPR protection and
diminish incentives for innovation.

Nevertheless, France is a traditionally strong
defender of intellectual property rights and has
highly developed protection for intellectual
property. Under the French system, patents and
trademarks protect industrial property, while
literary/artistic property is protected by
copyrights. By virtue of the Paris Convention and
the Washington Treaty regarding industrial property,
U.S. nationals have a "priority period" after filing
an application for an U.S. patent or trademark in
which to file a corresponding application in France.
This period is twelve months for patents and six
months for trademarks.

A8. Transparency of the Regulatory System

The French government has made considerable progress
in recent years improving the transparency and
accessibility of its regulatory system. Government
Ministers, companies, consumer organizations and
trade associations may petition the Unfair
Competition Council to investigate anti-competitive
practices.

Of most concern to foreign companies has been
standards setting. With standards different from
those in the U.S., rigorous testing and approval
procedures must sometimes be undertaken before goods
can be sold in France. Where EU-wide standards do not
exist, specific French standards apply. The United
States and the EU have negotiated mutual recognition
agreements covering the testing and certification of

PARIS 00000232 011.2 OF 020


certain specified regulated products. Information
about these agreements and efforts to extend them can
be found at the website of the Trans-Atlantic
Business Dialogue, [http://www.tabd.com/]. The
National Institute of Standards and Technology,
[http://www.nist.gov/], is represented at the
International Bureau of Weights and Measures,
[http://www.bipm.fr/], located in Sevres, France, and
may be of assistance to firms.

Industry associations have an influential role in
developing both government policies and influencing
self-regulatory organizations. U.S. firms may find
it useful to become members of local industry groups.
Experience has shown that even "observer" status can
offer U.S. firms an insight into new investment
opportunities and greater access to government-
sponsored projects, even if U.S. firms sometimes feel
they are not always given an adequate opportunity to
participate in the determination of regulations.

A9. Efficient Capital Markets and Portfolio
Investment

Access to Capital and Capital Markets

France has an open financial market that allows firms
easy access to a variety of financial products in
both French and international markets. As markets
expand, foreign and domestic portfolio investment has
become increasingly important. France continues to
modernize its marketplace, introducing tax-advantaged
retirement funds in 2004. Facing the prospect of
increasingly tough competition with other European
marketplaces following the introduction of the Euro,
French financial markets are continually updating and
adapting their products, procedures and services.

France is actively involved in the effort to create a
system of internationally accepted accounting
standards (to learn more, go to
[http://www.iasb.org.uk/] or search the SEC's website
at [http://www.sec.gov/]. Most EU listed companies
were required to use international accounting
standards from 2005. French market and banking
regulators enhanced and developed cooperation with
their foreign counterparts. Some aspects of French
legal, regulatory and accounting systems may not be
as transparent as U.S. systems, but they are
consistent with international norms.

Commercial banks offer all classic financing
instruments, including short, medium, and long-term
loans, short-and medium-term credit facilities, and
secured and non-secured overdrafts. Commercial banks
also assist in public offerings of shares and
corporate debt, mergers, acquisitions and takeovers.
Banks offer hedging services against interest rate
and currency fluctuations. France has 161 foreign
banks including 57 non-EU banks (some with sizable
branch networks) with total assets accounting for
around 10% of total bank assets at the end of 2005.
Foreign companies have access to all banking
services. Although some subsidies are available for
home mortgages and small business financing, most
loans are provided at market rates.

Increasingly, firms in France are bypassing banks and
going directly to financial markets for their
financing needs. The center of the French market is
the Euronext stock exchange. Euronext N.V., a
holding company incorporated under Dutch law, was
formed on 22 September 2000 when the exchanges of
Amsterdam, Brussels and Paris merged. The Euronext
group expanded at the beginning of 2002 with the
acquisition of LIFFE (London International Financial
Futures and Options Exchange) and the merger with the
Portuguese exchange BVLP (Bolsa de Valores de Lisboa
e Porto). As of December 2006, Euronext listed 1,210
companies (of which 300 are foreign excluding
countries members of Euronext),with a total

PARIS 00000232 012.2 OF 020


capitalization of USD 2.8 billion. In February 2005,
Euronext Paris merged the three separate markets of
the Paris exchange, the cash market (QMarche au
ComptantQ),the regulated market (QSecond MarcheQ)
and the QNouveau MarcheQ (growth segment) on which
new companies, especially smaller ones with an
emphasis on growth and technology, can raise start-up
capital. The new market list (QEurolistQ) was split
in three segments based on the capitalization of
companies (150 million euros, 150 million to 1
billion euros, and more than 1 billion euros). The
changes are aimed at improving liquidity and
visibility of small- and medium-sized companies. A
financial futures market, the "Marche a Terme des
Instruments Financiers," commonly known as the MATIF,
trades standard contracts on interest rates, short-
and long-term bonds, stock market indices, and
commodities. It has established linkages with its
German and Swiss counterparts as well as with the
Chicago Mercantile Exchange. Options are traded on
the "Marche des Options Nigociables de ParisQ (MONEP)
exchange, operated by Euronext. Finally, though not
nearly as developed as in the United States or the
United Kingdom, venture capital markets (QMarche
LibreQ and QMarche de gre a greQ) have become
increasingly important ways for start-up firms to
raise capital. In 2005, Euronext created a market,
QAlternext,Q to offer companies a new unregulated
market (based on the legal definition of the European
investment services directive) with more consumer
protection than the QMarche Libre,Q which will
continue to operate. Euronext is in the process of
merging with the New York Stock Exchange. The deal
should be settled in the first quarter of 2007. The
merger will increase international exposure to the
European exchange and reduce trading fees, which
should attract more investors.

Foreigners hold more than 45% of the capital of
publicly traded French companies. For a foreign
company incorporated in an OECD country to be listed
on the Euronext stock exchange, it must be sponsored
by a French bank or broker. It must also prepare a
French language prospectus to get a permit from
"Autorite des Marches Financiers - AMF,Q the French
equivalent of the SEC. Foreign companies are
authorized to provide statements in English and a
short summary in French. Since July 1, 2005, France
has applied European regulation 809-2004 that details
the content of prospectuses. An application to the
AMF must include a summary in French or any other
language commonly used in financial issues that
describes "essential information related to the
content and modalities of operations" as well as to
the "organization, financial situation and
development of the activity of the company". Details
may be found on the AMF web site [http://www.amf-
france.org], which merged with the COB web site
[http://www.cob.fr].

The sponsoring bank or broker is responsible for
placing the securities with investors when the
securities are listed and for acting as a market
maker. More information is available on the Paris
Stock Exchange website, [http://www.euronext.com].

Cross-Shareholding

An intricate network of cross-shareholdings among
French corporations has often been seen as a barrier
to foreign acquisition of French firms. Often, two
French companies will each own a significant share of
the other. This system, which was traditionally a
means to help ensure state-control of the economy,
has weakened in recent years under the pressure of
the marketplace.

Mergers and Acquisitions

Although French laws regarding takeovers do not
discriminate against foreign investors, a hostile

PARIS 00000232 013.2 OF 020


takeover in France by a foreign investor could face
public and even official scrutiny. Provisions of the
company takeover law are designed to limit hostile
takeovers of publicly traded companies. For example,
with the new regulation, passed by the Parliament on
December 15, 2005, stockholders are required to
notify company management and AMF when they have
decided to prepare a takeover. France extended its
public offering rules by imposing some additional
obligations on investors taking control of a company
listed on a French market depending on the level of
voting rights in the targeted company and the nature
of the proposed acquisition.

In transposing the European takeover directive,
France has tried to reconcile its objectives of
reestablishing its credentials as an investor-
friendly country, while allowing companies to defend
themselves against Qpredators.Q French companies may
suspend implementation of a takeover if they are
targeted by a foreign company that does not apply
reciprocal rules. The government also introduced an
amendment allowing a U.S.-style Qpoison pillQ
takeover defense, including granting existing
shareholders and employees the right to increase
their leverage by buying more shares through stock
purchase warrants (Qbons de souscription dQactions -
BSAQ) at a discount in case of an unwanted takeover.
New provisions include a reform of AMF supervisory
procedures. Procedures cover declaration of
conformity, offer price, declaration of a bid in
relation to takeover rumors and nomination of an
independent appraiser when conflicts of interests
exist [http://www.amf-
france.org/documents/general/7341_1.pdf].

A10. Political Violence

Occasionally anti-American sentiments, particularly
by those who see themselves as threatened by U.S.
policies, result in demonstrations against U.S.
investments. That said, such incidents are rare.
France is one of the world's leading democracies and
a founding member of the EU; there is little danger
of insurrection, belligerent neighbors, or widespread
civil disturbances. Perceived discrimination and a
lack of economic opportunity contributed to
disturbances that affected poorer largely Muslim
suburbs of FranceQs largest cities in late 2005 and
early 2006. Most observers believe the unrest was
fanned by small groups of youths looking for trouble,
and incidents of violence have largely dissipated.
Moreover, since the terrorist attacks of September
11, 2001, there have been relatively fewer anti-
American demonstrations in France as compared to
prior years.

A11. Corruption

France has laws, regulations and penalties that
effectively combat acts of corruption committed in
France. A 1993 law established a Central Service for
the Prevention of Corruption under the aegis of the
Ministry of Justice. The French judiciary is
responsible for prosecution, and is active in doing
so.

French magistrates have for the first time in
December 2006 launched a probe against officials from
French oil company Total for the bribery of foreign
civil servants, a criminal offence in France since
2000, when the GOF ratified the OECD Anti-Bribery
Convention and enacted implementing legislation to
enforce its provisions. The OECD Anti-Bribery
Conventions are enforced via amendments to the
Criminal code, which have been integrated into
Articles 435-3 and 435-4 of a new chapter on
international corruption (Chapter V, Title III, Book
IV). Article 435-3 incriminates the offer or promise
of a bribe, but not the actual payment of a bribe,
which is explicitly mentioned in the convention.

PARIS 00000232 014 OF 020


Furthermore, there is a difference in the treatment
of victims of bribery, depending on whether the
bribery is domestic, EU or foreign. In cases of
bribery of GOF/EU officials, any victim may initiate
prosecution. In cases involving the bribery of other
foreign government officials, criminal proceedings
may be initiated only by the public prosecutor on the
basis of a complaint from a Government official in
the country where the bribery took place.

The OECD Anti-Bribery convention is further enforced
via amendments to the Tax Code and to the Code of
Criminal Procedure. Article 39-2 of the French Tax
Code puts an end to the tax deductibility of bribes
as of the entry into force in France of the
Convention (September 29, 2000). Finally, Article
706-1 of the amended Code of Criminal Procedure
provides that acts criminalized by the OECD
Convention will be prosecuted in the Economic and
Financial Unit of the Paris Court of Justice.

France has also begun ratification of the Council of
EuropeQs civil and criminal conventions on
corruption. The procedure should be completed by the
end of February 2007.

There have been no specific complaints from U.S.
firms of unfair competition or investment obstacles
due to corrupt practices in France in recent years.
More information on the international fight against
corruption can be found at the Internet site of
Transparency International
[http://www.Transparency.org]. According to
Transparency InternationalQs French Chapter, the
sectors most affected by corrupt practices tend to be
public works and the defense industry.


B. Bilateral Investment Agreements

1959 U.S.-France Convention on Establishment

U.S. investment in France is subject to the
provisions of the Convention on Establishment between
the United States of America and France, which was
signed in 1959 and is still in forcQ Some of the
rights it provides to U.S. nationals and companies
include:

-- The right to be treated like domestic nationals in
all types of commercial activities including the
right to establish offices and acquire majority
control of French firms, and in obtaining and
maintaining patent and trademarks. (This right does
not apply to firms involved in communications, air
transportation, water transportation, banking, the
exploitation of natural resources, certain
"professions," and the production of electricity) ;

-- The right to receive the best treatment accorded
to either domestic nationals and companies or third
country nationals and companies with respect to
transferring funds between France and the U.S.;

-- The requirement that property may only be
expropriated for a public purpose and that payment
must be just, realizable and prompt.

The treaty does not apply to the use or production of
fissionable materials, arms or any materials that are
used directly or indirectly to supply military
establishments. The treaty does not prevent
application of measures necessary to protect
essential security interests.

Bilateral Investment Treaties

Investments in France by other EU member states are
governed by the provisions of the Treaty of Rome and
by Union Law. France has also signed Bilateral
Investment Treaties (BITs) with the following 81
countries: Albania, Algeria, Argentina, Armenia,

PARIS 00000232 015 OF 020


Azerbaijan, Bangladesh, Bolivia, Bulgaria, Chile,
China, the Democratic Republic of the Congo, Costa
Rica, Croatia, Cuba, Czech Republic, Ecuador, Egypt,
El Salvador, Equatorial Guinea, Estonia, Ethiopia,
Georgia, Guatemala, Haiti, Hong Kong, Honduras,
Hungary, India, Indonesia, Iran, Israel, Jamaica,
Jordan, Kazakhstan, Korea (South),Kuwait, Kyrgyz
Republic, Laos, Latvia, Lebanon, Liberia, Lithuania,
Macedonia, Malaysia, Malta, Mauritius, Moldavia,
Mexico, Mongolia, Morocco, Nepal, Nicaragua, Nigeria,
Oman, Pakistan, Panama, Paraguay, Peru, Philippines,
Poland, the Dominican Republic, Qatar, Romania,
Russia, Singapore, Slovakia, Slovenia, South Africa,
Sri Lanka, Sudan, Syria, Trinidad and Tobago,
Tajikistan, Tunisia, Turkmenistan, Ukraine, United
Arab Emirates, Uruguay, Uzbekistan, Vietnam, Yemen,
and the former Federal Republic of Yugoslavia.

Bilateral Investment Treaties signed with the
following 12 countries have not yet been ratified:
Bahrain, Bosnia, Brazil, Belarus, Ghana, Libya,
Madagascar, Mozambique, Namibia, Uganda, Zambia and
Zimbabwe.

French BITs generally cover the following:

-- Just and equitable treatment that is no less
favorable than that accorded to domestic investors or
the most favored investor from a third country;

-- Restrictions on expropriation of investments, and
requirements that, in the case of expropriation,
compensation is prompt and adequate;

-- Free transfers;

-- The ability to resolve investor-state disputes
through binding international arbitration.


C. OPIC and Other Investment Insurance Programs

Given France's high per capita income, investments in
France do not qualify for investment insurance or
guarantees offered by the Overseas Private Investment
Corporation (OPIC). Further information can be found
at [http://www.opic.gov].


D. Labor

France's private sector labor force is one of the
country's strongest points in attracting foreign
investment, combining high quality with relatively
competitive unit-wage costs compared with those of
other industrialized countries.

The labor code sets minimum standards for working
conditions including the workweek, layoffs, overtime,
vacation and personal leave. In October 2006, the
GOF drafted a bill on "Social Dialogue" which, if
approved by Parliament, would call for mandatory
preliminary negotiations between French employee and
employers' unions prior to any modification of the
Labor Code. The bill could be adopted by the end of
February 2007.

France recently adopted an employeesQ shareholding
law (QLoi sur la ParticipationQ),which involves some
changes in the labor code. The law encourages the
purchase of shares by employees, employeesQ savings
accounts, and better representation of employees as
shareholders. Employees in large companies who are
laid off for economic reasons may benefit from
Qmobility leaveQ which involves training, short-term
contracts, or transfer to another company within a
pole of competitiveness. A new Qtransport allowanceQ
will benefit employees who commute using public or
private
transportation.([http://www.legifrance.gouv.f r] Q
search the 31 December 2006 French Official Journal Q
law 2006-1770 of 30 December 2006).


PARIS 00000232 016 OF 020


Other labor standards are contained in collective
agreements, which are usually negotiated by sector on
a national or regional basis by the various trade
union federations and employers' associations. French
absenteeism is modest by European standards, and in
the private sector peaceful labor relations generally
prevail.

While the rate of unionization in France has steadily
declined to a little more than half that of the
United States, French labor law provides an extensive
institutional role for employee representatives and
for organized labor.

-- In companies with more than 10 employees,
employee delegates are elected for a one-year term.
They are authorized to present individual or
collective claims and grievances relating to working
conditions, to inform government labor inspectors of
any complaints under the labor law, and to concur
with management in any reorganization of the
workweek. Management is required to meet with
employee delegates at least montQy.

-- A company with more than 50 employees must have a
joint management/employee enterprise committee, to
which employee representatives are elected. The
committee must be consulted for all major corporate
decisions, but has no veto. The enterprise committee
must be provided with the same information that is
made available to shareholders. It is funded by the
company at a rate equal to at least 0.2 percent of
the firm's payroll, and uses this money to finance
social and cultural activities for the benefit of
employees.

-- Workers also hold most slots on occupational
health and safety committees, which are mandatory in
medium and large size companies. Labor tribunals
(playing a role largely equivalent to the NLRB in
resolving labor disputes) are comprised of equal
numbers of union and employer representatives.
Appeals are possible to the level of the QCour de
Cassation,Q one of France's high courts.

Due to a variety of macro and microeconomic factors,
including high payroll taxes, a high minimum wage,
and rigid labor laws, French businesses tend to use
less labor-intensive procedures and rely more on
labor saving technology than businesses in other
countries. This is one reason for France's high
unemployment rate.

Most of the candidates for the 2007 Presidential
elections have called for a modification of the 35-
hour workweek, so further change in this area is
likely.


E. Foreign Free Trade Zones/Ports and Competitiveness
Clusters

France is subject to all European Union free trade
zone regulations and arrangements. These allow member
countries to designate portions of their customs
territory as free trade zones and free warehouses in
return for commitments in favor of employment. France
has taken advantage of these regulations in several
specific instances. The French Customs Service
administers these zones and can provide more details.
Customs can be contacted at the finance ministry web
address: [http://www.douane.gouv.fr] use search to
find information about Qzones franchesQ)]. France
has designated 85 trade zones, including 14 new zones
in 2006.

In addition, the French government has renewed the
tax exemption program for five years, until December
31, 2011, in the existing urban "enterprise zones"
(Zones Franches Urbaines). Since January 2004, all
such zones benefited from tax exemptions on corporate
tax, payroll taxes, professional tax and real estate

PARIS 00000232 017 OF 020


tax. Related information is notably available at the
City Government web site [http://www.ville.gouv.fr].

More information on enterprise and investment zones
is available from various sources: [http://www.zones-
franches.org] [http://www.InvestinFrance.org]
[http://www.diact.gouv.fr] [http://www.oseo.fr] for
assistance to small and medium sized companies.

In March 2006, the government approved 66
competitiveness clusters including 10 for projects
with international ties and 6 with related missions.
Poles are designed to reinforce innovation and
encourage innovative businesses to remain in France.
They will benefit from income and social tax
exemptions [http://www.competitivite.gouv.fr].
Clusters involved in research and innovation will
also benefit from financial support from the state-
owned investment bank Caisse des Depots.


F. Foreign Investment Statistics

Foreign investment represents a significant
percentage of production in many sectors. Rapid
growth in the new technologies sector has given way
to renewed growth in traditional sectors:
automobiles, metalworking, aerospace, capital goods,
consultancy and services. France has remained one of
the main destinations of foreign direct investment
(FDI). Foreign investment inflows more than doubled
in 2005 to 3.0 percent of GDP (versus 1.2 percent in
2004). Based on preliminary information the U.S.
remained one the largest sources of FDI in France.
Using Bank of France balance of payments data based
on the historical book value of investment, U.S.
firms accounted for 19.5 percent in 2004 (versus more
than 20% in previous years) of the stock of foreign
investment.

Using the book value instead of the market value of
investments tends to underestimate the value of U.S.
investment in France. This is because investments by
U.S. companies tend to be considerably older than
other countries' investments and because U.S. firms
often finance expansions and acquisitions on domestic
French capital markets or through subsidiaries in
third countries. Thus, much U.S. investment in France
is not recorded in balance of payments statistics,
even though it may ultimately be controlled by U.S.
citizens. The December 30, 2005 decree 2005-1739 on
financial relations with foreign countries defines
foreign investment operations that have to be
notified to the Bank of France for the establishment
of the balance of payments and FranceQs external
position. Firms with questions should contact the
Bank of France at the following address:

Banque de France
Service de la Balance des Paiements
31, rue Croix-des-Petits Champs
Tel: 01.42.92.42.92

Correcting for statistical biases, and including the
value of U.S. holdings of French stocks, the market
value of the stock of U.S. investment in France may
be as much as five times the USD 60.9 billion book
value for 2005 reported in U.S. Department of
Commerce data ([http://bea.gov] search in
International). About 2,000 affiliates of U.S. firms
are established in France. Around 603,000 jobs
result from U.S.-originated investments.

Today, foreign-controlled firms play a significant
role in France's economy, accounting for 15 percent
of capital expenditures, 30 percent of exports, and
17 percent of value added.

An updated list of U.S. investors may be found on
[http://www.investinfrance.org/NorthAmerica/
YourProject/Database/?l=en]


PARIS 00000232 018 OF 020


Lists of foreign investors by industry can be found
in local periodicals such as Expansion ("Les 1000 de
l'Expansion":
[http://www.lexpansion.com/PID/7800.html]). The
Expansion link provides useful information on the
first 1000 companies and financial institutions
established in France.


Stock by country of origin (Book value) (USD
billions)

2003 2004 2005

EU (25) 348 422 n.a.

EU (12) 291 321 n.a.
of which

Netherlands 82 94 n.a
Germany 58 72 n.a.
Belgium 58 67 n.a.
Luxemburg 32 41 n.a.
Italy 15 20 n.a.

Other EU (15) 82 94 n.a.
Of which
UK 74 88 n.a.
Sweden 6 7 n.a.

New EU 0 0 n.a.

Other Industrialized
countries 109 130 n.a.
Of which
USA 64 72 n.a.
Switzerland 27 36 n.a.
Canada 5 6 n.a.
Japan 9 11 n.a.

Other countries 17 16 n.a.

Total 475 569 n.a.

Total as percent of GDP 25.2 27.4 n.a.
(Exchange rate:)
USD 1.00 equals Euro 0.88 0.80

Source: Bank of France

Stock of Foreign Investment in France (Market value)
(USD billions)

2003 2004 2005

Total 623 774 922

Total as percent of GDP 42.7 41.1 47.5
(Exchange rate:)
USD 1.00 equals Euro 0.88 0.80 0.80

Source: Bank of France

Stock by Industrial Sector of Origin (Book value)(USD
billions)

2003 2004 2005

Real estate 255 309 n.a.
Financial Intermediation 74 86 n.a.
Of which holdings 31 34 n.a.
Manufacturing 86 105 n.a.
Of which
-Automobiles 9 10 n.a.
-Chemical industry 25 30 n.a.
Other 60 69 n.a.
Total 475 569 n.a.
(Exchange rate:)
USD 1.00 equals Euro 0.88 0.80

Source: Bank of France

PARIS 00000232 019 OF 020



Flows by country of origin (Market value) (USD
billions)

2003 2004 2005

EU (25) 31 30 46

EU (12) 26 19 38
of which
Germany 2 5 7
Belgium 10 3 6
Italy 0 2 1
Netherlands 4 0 7

Other EU (15) 5 10 8
of which
UK 4 8 8
Denmark 0 1 0
Sweden 0 0 0

New EU members (1) 0 0 0

Other Industrialized
Countries 10 9 15
Of which
USA 3 6 12
Canada 5 -0 -1
Japan 1 0 0
Switzerland 1 1 2

Other countries 2 -7 3

Total 43 32 64

Total as percent of GDP 2.2 1.5 3.0
(Exchange rate:)
USD 1.00 equals Euro 0.88 0.80 0.80

Source: Bank of France
(1) Cyprus, Estonia, Hungary, Latvia, Lithuania,
Malta, Poland, Czechoslovakia, Slovakia, and
Slovenia.


Stock by country of destination (Book value) (USD
billions)

2003 2004 2005

EU (25) 383 477 n.a.

EU (12) 269 336 n.a.
of which

Germany 48 68 n.a.
Belgium 72 81 n.a.
Italy 24 28 n.a.
Netherlands 70 88 n.a.

Other EU (15) 103 124 n.a.
Of which
UK 95 115 n.a.
Sweden 6 6 n.a

New EU 11 16 n.a.

Other industrialized
countries 217 228 n.a.
of which
USA 141 149 n.a.
Canada 27 22 n.a.
Japan 15 17 n.a.
Switzerland 26 29 n.a.


Other countries 52 56 n.a.

Total 652 761 n.a

Total as percent of GDP 34.6 36.7 n.a.

PARIS 00000232 020 OF 020


(Exchange rate:)
USD 1.00 equals Euro 0.88 0.80

Source: Bank of France

Stock of French FDI Abroad (Market value) (USD
billions)

2003 2004 2005

Total 1,080 1,262 1,577

Total as a % of GDP 65.2 62.4 73.9

Stock by Industrial Sector Destination (Book
value)(USD billions)

2003 2004 2005

Real estate 289 319 n.a.
Financial Intermediation 146 153 n.a.
Of which holdings 43 45 n.a.
Manufacturing 104 125 n.a.
Of which
-Automobiles 25 29 n.a.
-Chemical industry 16 35 n.a.
Other 141 205 n.a.
Total 652 761 n.a.
(Exchange rate:)
USD 1.00 equals Euro 0.88 0.80

Source: Bank of France

Flows by country of destination (Market value) (USD
billions)

2003 2004 2005

EU (25) 37 50 86

EU (12) 23 36 64
of which
Germany 6 10 0
Belgium 6 6 17
Italy 3 2 14
Netherlands 11 6 2

Other EU (15) 13 10 19
Of which
UK 12 9 14
Denmark 0 0 5
Sweden 0 1 0

New EU members (1) 1 4 2

Other Industrialized
Countries 16 4 23
Of which
USA 6 2 1
Canada 1 -5 1
Japan 3 2 7
Switzerland 5 2 6

Other countries 1 3 6

Total 53 57 116

Total as a percent of GDP 2.8 2.7 5.4
(Exchange rate:)
USD 1.00 equals Euro 0.88 0.80 0.80

Source: Bank of France
(1) Cyprus, Estonia, Hungary, Latvia, Lithuania,
Malta, Poland, Czech Republic, Slovakia, and
Slovenia.

STAPLETON#