Tech Development A French Resolution

France aims to create its own Silicon Valley on the Riviera.
France aims to create its own Silicon Valley on the Riviera. (By Peter S. Goodman -- The Washington Post)
By Peter S. Goodman
Washington Post Foreign Service
Friday, December 9, 2005

CANNES, France -- On this rocky stretch of Mediterranean coast, playground for the glitterati, where the day begins with lunch and lunch gives way to a nap, cocktails and the discotheque, France is attacking its national unemployment crisis with a dream that seems positively un-French: It aims to cultivate a new Silicon Valley.

At a research-and-development park overlooking the sea, scientists in futuristic campuses develop a system that could allow doctors to monitor patients' vital signs and drug regimens at home. Others master technology allowing shipping companies to track inventory on rail, road and sea. Lunch is rushed. Coffee is carried to labs in paper cups. Talk is of wireless and satellite, of Internet protocol and the architecture of computer chips.

Global high-tech firms such as Texas Instruments, Philips and Alcatel have been on the famed Cote D'Azur for years, joined by hundreds of start-up companies. But a recent national initiative aims to encourage them to work together to develop new products that could make France a telecommunications leader and, most important, create jobs -- a need underscored by the waves of violence that afflicted Paris's suburbs last month.

This summer, the government designated this area one of six Competitive Poles -- clusters of industry and research -- earmarking $1.8 billion in tax credits and subsidies for projects here over the next three years.

"This is something new," said Jean-Pierre Mascarelli, president of Sophia Alps Maritimes Promotion, an agency that courts investment. "In France, it's new to have something new."

The notion of a notoriously bureaucratic French government stage-managing innovations in the high-tech sector -- typically known for fierce competition and a libertarian ethos -- seems paradoxical. But in France, business remains a risk-averse activity in which industry looks to the government for succor. Proponents say this is precisely what makes the initiative necessary: France has proven skilled at research but weak at transforming ideas into money -- a step requiring government orchestration.

"In France, we have a lot of people who know a lot about high-tech, but they are not really put together," said George Kayanakis, chief executive of ASK, a Cannes maker of computerized tickets that is helping make electronic labels used to track inventory worldwide. "The Frenchman doesn't really like to gather. You need to have somebody who tells you, 'You have to get together.' You have to have a project that is fully approved by everybody, with all the details worked out and no risk for anybody."

Through the Competitive Poles program, the government hopes to create more than 84,000 jobs nationwide in three years and about 200,000 jobs over the next decade.

But even if the roughly 1,000 tech companies of the region can be knit together, a key question confronts the initiative and the future of the French economy: In a country in which a labor contract can be as binding as a marriage and in which steep corporate taxes fund a generous welfare state, will government incentives spur companies to hire significant numbers of people?

In France, firing workers is highly restricted and often subject to legal challenge. The national unemployment rate sits at about 10 percent, and 20 percent among those in their 20s. Economists say the greatest impediment to job growth is the reluctance of managers to take on new workers lest they get stuck with exorbitant, long-term bills for unproductive employees.

Moreover, some argue that France's continued nurturing of the welfare state -- the labor protections plus the social benefits and high taxes needed to fund them -- conflicts with efforts to make the country more competitive as it grapples with unemployment and the continued flow of investment to lower-cost countries such as Romania, Poland and China. Taxes to fund state-run pensions, medical care and other social services amount to nearly half of wage costs, according to the Organization for Economic Cooperation and Development.

France "is afraid to adapt to globalization," said Guillaume Sarkozy, president of a Paris textile firm, Tissage de Picardie, and head of the Industrial Textiles Union, a trade group. "The old model has to be changed."

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