The Economic Department of the French Embassy in the US met with Courtney Rickert McCaffrey, Manager, Thought Leadership, A.T. Kearney Global Business Policy Council, Following the publication of the 2019 A.T. Kearney FDI Confidence Index which placed France at a historically high 5th spot in the world ranking for foreign investment atractiveness.
What makes a country attractive to FDI according to you?
In recent years, there are three factors that have consistently ranked among the top five factors that investors consider. The first is a country’s tax rate and ease of tax payments, so countries that have low and stable tax rates with an efficient filing process are likely to be attractive FDI destinations. Another is a country’s regulatory transparency and the lack of corruption. And third is the country’s general security environment.
There are two other drivers of FDI attractiveness that I would highlight. One is a country’s technological and innovation capabilities. This factor hits its highest-ever level of investor attention this year and I expect this driver of a country’s FDI attractiveness to continue to grow in importance as the global economy becomes more digitized.
Finally, a country’s cities are an important driver of FDI attractiveness. Most FDI is located in cities and a majority of investors say that their companies are placing more emphasis on cities as the basis of selecting FDI destinations than they have in the past. Large, high-performing, and well-connected cities therefore help countries to attract FDI.
How do you explain the historical progress of France in the ranking?
France has ranked in the top 10 markets about which investors are most confident in investing for six consecutive years. During that time, France has steadily risen from 10th place in 2014 to 5th place this year—its highest-ever ranking in the history of the Index.
One explanation for France’s rise in the ranking is structural. The French investment environment is competitive on the factors that investors prioritize—taxes, regulatory transparency, and security. In addition, France has the fifth-largest economy in the world and the second-largest consumer market in Europe. France’s economic growth has also strengthened over the past several years and is forecast to continue to grow more robustly than the other European G7 markets this year.
Another explanation for France’s rise in the FDI Confidence Index rankings is the pro-business reform agenda that the government has been pursuing. Modernizing employment laws, reducing the corporate tax rate to 25 percent by 2022, eliminating bureaucratic red tape, and the newly-approved Action Plan for Business Growth and Transformation are likely helping to make France more attractive to investors.
How do you see the future of FDI flows in the years to come?
Perhaps the two biggest uncertainties for future FDI flows in Europe are Brexit and dramatic technological changes in the global economy. On both fronts, France seems well-positioned for the future. The Paris city administration launched the Choose Paris initiative to seize any opportunities arising from Brexit. And a €10 billion federal fund to spur innovation, along with a French Tech Visa to attract more international talent to the country’s emerging start-up scene, is promoting investment in the technology sector.