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France puts on business-friendly face

Government officials and tech executives concede the country has image problems, but they are trumpeting reforms.

REDWOOD CITY, Calif.--France is working on its image problem.

Although it remains one of the largest economies in Europe, the world still looks at France as a place difficult to conduct business, where nearly everyone is either on strike or at lunch--or so said government officials and tech executives the French Tech Showcase, a two-day conference taking place here.

"There is the sense that we are old fashioned, unproductive, too obsessed with the quality of life," said Clara Gaymard, president of the Invest in France Agency and a special representative for international investment. "France actually has a higher percentage of 20- to 29-year-olds with qualifications in science or technology than the U.S. or the U.K."

To boost its international competitiveness, the country has initiated a range of reforms in the past two years designed to make it easier for multinationals to invest in local companies and erect facilities in the country. It is now trumpeting the reforms in road shows.

New laws, for instance, let employers negotiate around the notorious 35-hour work week. Foreign executives transferred to France no longer have to worry about paying income tax in France and in their home country. The pension system has also been changed, as has the visa system.

Start-ups that spend a substantial amount of revenue on research and development can qualify for an eight-year income tax holiday. In all, the government has passed 85 pieces of economic-reform legislation since the beginning of 2004. A council of 21 international CEOs now meets on a semiregular basis to advise the prime minister.

The country has also begun to embrace English more. To attract students from India, Japan and elsewhere, France has begun to teach university courses in the language from across the channel. Nearly 30 percent of the slots at the top universities are taken by people who are not fluent in French.

"Ten years ago, you would have to speak French. Now it is not the same anymore," she said.

The French economy, Gaymard points out, is still one of the largest in the world. France was the third-largest recipient of direct foreign investment during the past three years, ranked only behind the United States and China. The country is the fourth-largest exporter and is home to 10 of the world's 100 largest companies. Because of decades spent developing nuclear power plants, the country is less prone to shifts because of oil prices. It even exports electricity to Italy and Spain, she said.

In the tech market, the government intends to invest more in nanotechnology, biotech, automotive and aeronautics. Without the prodding of Charles DeGaulle in the 1960s, "the story of Airbus would have never happened," Gaymard said.

Repeating Airbus, however, may be difficult in the global marketplace. Despite a history of technological achievements, French companies have never been great at sales and marketing, said Vincent Worms, a partner at Partech International, a venture capital firm. The domestic market is also relatively small.

"The main exit for these high-tech companies will be to get bought, and generally the buying companies are American or Japanese," said Laurent Kott, vice president of technology transfer for INRIA, a national laboratory. One of the most-often cited French success stories is Kelkoo, which Yahoo bought for around $579 million.

Doing business in France, of course, is more regulated in many regards than in the United States. Layoffs, for instance, remain much more difficult. Under previous laws, employees could object to layoffs five years after the cutbacks were announced and object to the form of the layoffs a year after they were initiated. Now, objections to layoffs must come in the first year and objections to the form of layoffs much come within a month, Gaymard said. Still, that's more restricted than in the states.

"In an economy with 10 percent unemployment, it is difficult to say you want to make it easier to conduct layoffs," Gaymard said.