As French foreign trade minister Nicole Bricq visited Kuwait and Qatar last month with a delegation of business leaders, her message was clear: the country urgently needs more inward investment from this region as it seeks to stave off chronic unemployment and an ongoing economic malaise.

Although France is certainly not alone in its economic woes the government, which came to power last May, has reason to be concerned - almost 11 per cent of the 65 million population are currently out of work, the worst level for about 15 years.

The wealthy Gulf states are by now well accustomed to European delegations - leaders, politicians and business people - beating a path to their doors, looking for ways to alleviate their difficult economic circumstances.

Gulf investors, including sovereign wealth funds, have responded, in a fashion. The Qataris have in particular acquired a taste for French trophy assets as Qatar Investment Authority took on Paris Saint Germain Football Club and Katara Hospitality, formerly Qatar National Hotels Company, brought the luxury Le Royal Monceau Hotel in Paris into its global portfolio.

However, while these high profile acquisitions have undoubtedly raised Frances international investment profile, they do not address a key priority for the government: job creation.

Gulf Co-operation Council (GCC) investments in France which actually create significant numbers of jobs remain few and far between. As of the end of 2011, 90 companies from the GCC were doing business in the country, employing about 3,000 people, according to official statistics. There were just three new project investments from the Gulf in 2011.

The [French] government is placing a lot of emphasis on boosting Frances economic competitiveness to create jobs, says David Appia, the chairman and chief executive of Invest in France Agency (IFA), a government organisation which promotes inward investment to the country from a network of offices around the world, including in Abu Dhabi and Dubai.

Improving the competitiveness of the worlds fifth-largest economy will be no mean feat. In its 2013 Index of Economic Freedom, US think tank The Heritage Foundation ranked France the worlds 62nd freest economy, compared with the UK at 14th and Germany at 19th. The Index noted that French government spending amounts to a very high 56.1 per cent of total domestic output while public debt continues to rise with deficits at about five per cent of GDP. Inevitably, it also referred to Frances notoriously rigid labour market and complex tax regime, which have been blamed for blunting the countrys investment potential.

Appia highlights some of the steps the government is taking to revive the economy and alleviate the unemployment problem, part of a new national plan for competitiveness, growth and employment unveiled last November by prime minister Jean-Marc Ayrault.

One is the introduction of a new tax credit for companies which will effectively reduce their labour costs. The credit is set at four per cent this year, and six per cent from 2014. Another is the creation of a new bank (Banque Publique de Investissement) last January to provide financing for small and medium sized enterprises.

And another measure seeks to make France an easier place to do business, including limiting potentially confusing changes to the tax regime.

The government is also attempting to press ahead with labour market reform, and in January this year French employers and trade unions agreed to a breakthrough deal which would offer businesses some relief from rules governing the hiring and firing of workers. This would include the introduction of a measure whereby companies could reduce employee working hours and pay if it meant avoiding redundancies - a particularly pertinent issue at present.

We had to react and take initiatives to improve the situation, and that is being done. Stakeholders are now asking the government to put pressure on the parliament to pass the agreement into law, says Appia. I am confident the new law will respect this carefully crafted balance, and that French labour laws will be improved by next April or May.

It is of course difficult to gauge at this stage what effect such initiatives will have on future investment figures from the GCC, though France is at least clear about the sectors it wants to encourage.

We offer a 30 per cent rebate on all R&D expenditures, which is unparalleled in Europe, and this currently benefits 2,000 foreign companies. This comes at a cost to the treasury of more than four billion euros a year, but it is a good investment [for the government], Appia says.

In Kuwait, minister Bricq told a meeting at the chamber of commerce that 70 per cent of Kuwaiti investments in France were currently in real estate, and urged diversification into the industrial sector. In Qatar, she was forced to deflect criticism from French media about Qatari investments in her country. France is currently the Gulf states second-largest foreign investment destination.

Qatari investments are and will be welcomed in France. We will not listen to any sort of unfounded criticism, she told a press conference in Doha. We welcome Qatari investors who are ready to invest in France with long-term strategies. We welcome them for equity participation in our large groups and the acquisition of some of our prestigious brands. Nicole added.

Appia says that Gulf investors would likely look at both grassroots projects as well as acquiring existing distressed assets, but warns that expectations must be managed.

They probably wont be looking at investing in a new manufacturing plant employing 300 people to begin with, but will likely be making smaller investments with growth potential, he says.

One of the IFAs tasks is to understand the long-term goals of potential foreign investors, and this could be key to attracting more investment from the Gulf. Appia says the agencys representatives around the world met nearly 6,000 companies last year, canvassing opinions from decision makers on their investment strategies and what attracted them to a given location. The IFA then passed recommendations to the French government.

The number one reason why companies set up a business in a particular country is the market, and demography is a vital element of that. France has very favourable demographics, Appia says, adding that the IFA organises around 50 international missions every year, helping small regional agencies in France promote themselves to potential foreign investors.

Over the last two to three years we have also been working with increasing numbers of Asian companies, particularly from China, who set up their European businesses in France to reach markets in the Mediterranean, the Gulf and Africa, capitalising in some cases on Frances close historic links with countries in Africa, Appia adds.

Salim Saifi, IFAs chief representative in the GCC, believes the French hospitality industry, which attracts about 80 million visitors every year, will remain a lucrative target for regional investors.

As the worlds leading tourist destination and Europes second largest market, France offers many expansion opportunities for GCC hotel brands and investors, with a combination of a vibrant business market with unrivaled tourist potential. Foreign investors have unsurprisingly invested in France, boosting hotel capacity both in Paris and in Frances regions, he explains.

Appia says the high profile acquisitions of French trophy assets by Gulf investors can complement its work.

We try to highlight success stories which demonstrate confidence in our country. Investments of any kind infer trust in the country, which is integral to future investment, he states.

Whether the series of reforms undertaken by the government to shake up the economy and sharpen its competitive edge ultimately bear fruit by creating large numbers of new jobs remains to be seen. The Heritage Foundation, in its 2013 index, described progress on the measures and marginal and even derailed in some cases.

Should a free trade agreement between the GCC and the European Union ever see the light of day the GCC suspended negotiations in 2008 and there is currently no sign of talks being officially restarted then increased cross-investment would be a real possibility, says Appia. But that is clearly another issue for another day.

In the meantime if, through the international work of agencies like the IFA, France can convince Gulf investors that it is a good place to do business in the heart of Europe, it may yet be able to create the jobs it craves and navigate a calmer passage out of the current storm.

GCC direct stock of investments into France
200920102011
Saudi Arabia521543541
Bahrain818790
UAE3,5742,4123.788
Qatar459493649
Oman01211
Kuwait6721176
TOTAL GCC (millions of euros)4,7023,7585,155