Le Grand Paris. How would this project generate an economic growth?

b-The actual economic situation of Paris Ile-de-France

Paris Ile-de-France is one of the richest areas in the world. Indeed in 2007, only the cities of Tokyo, Los Angles and New York were having a greater GDP. By comparison, in 2003, the GDP of the region was about $513 billion, which represented at that time about 40% of the Chinese one or a bit more than 100% of the Dutch GDP¹⁸. Paris has a significant place within the EU27, as its GDP represents 4.7% of the European GDP (28.9% of the domestic GDP) in 2009¹⁹.

Paris is the biggest European region in term of inhabitants, as it represents 11.8 million people in 2009. Paris Ile-de-France population weights for 2.3% of the EU-27 population (and 18.2% of the French one). Nevertheless, the region is ranked only at the twenty-first place in term of density (978 inhabitants per sq.km), the most densified region being Brussels (6.512 inhabitants per sq. Km)²⁰

Its exportations represent € 55.7 million in 2009, while its importations were about €105.6 million. The main products in 2009 exported were pharmaceutical goods (7%) and automotive manufacturing products (6%). Concerning the Parisian importations, they are mainly automotive manufacturing products (14%) and natural hydrocarbons (11%). European Union members represented, in 2009, about half of the value of the Parisian foreign trade (45% of the exportations, and 58% of the total imports), nevertheless the USA are still the best client of Parisian companies (11% of total exports), its main supplier being Germany (15% of total imports)²¹.

¹⁷ Direction génerale de l'équipement de l'Ile-de-France, 1994, http://www.ile-defrance.equipement.gouv.fr/IMG/pdf/texte-complet cle0addb1.pdf

¹⁸ Laurent Davezies, Croissance sans développement en Ile-de-France, OEil-Créteil-Université Paris 12, 2007, PP. 1

¹⁹ Paris Region Economic development agency, Paris Region Key Figures, 2011, PP.6

²⁰ Ibid, PP.6

²¹ Paris Region Economic development agency, Paris Region Key Figures, 2011, PP.19

Still in 2009, 814.600 businesses belonged to the region (130.500 created that year), in 2008, 5.957.000 people were working in the region (salaried and non salaried). Moreover, compare to the others important region of Europe, Paris is also well positioned in term of unemployment rate (8.4%), as it is just below the EU-27 average rate (8.9%), London (8.4%), Madrid (14.0%) or Brussels (15.7%)²².

It is important to notice that Paris is also the European region number one regarding the rate of jobs created by Foreign Direct Investment. Indeed in 2009, 17.500 establishments were subsidiaries of international groups, which represent 15% of the total employment of the region. It is also interesting to precise that during the period 2003 to 2009, the Foreign Direct Investments grew by 60% in the region. In 2009, Japan was the most important origin country by representing 20% of jobs created by FDI (before the USA)²³.

As the origins of companies composing the region of Paris, the economic structure of Paris is also really diversified. Indeed, if we first analyzed the size of the firms composing Ile-de-France region, it is obvious to assume that the Paris' economy is mainly composed by Very small size enterprises (1 to 9 employees) as they represent 93% of the companies (696.121 companies). Small and medium size enterprises (10 to 249 employees) represent 7% (52.659), intermediate size companies (250 to 5000) represent 0.4% (3.212), and finally the large companies (over 5000 employees) represent 0.002% of the total companies present in the region (135). Regarding the top ranked companies in Paris Ile-de-France, La poste is the first employer of the region (56.600 employees), before Air France (52.100 employees) and SNCF (51.900 employees)²⁴.

The companies present in Paris area are mainly working on the third sector (87.2%), the second sector represents 12.2% and the first sector 0.7%. The following graph shows the total value and the percentage representation of each sector in the Parisian economy:

²² Ibid PP.10

²³ Paris Region Economic development agency, Paris Region Key Figures, 2011, PP.19

²⁴ Ibid, PP.17

²⁵Figure 1 : Value added by main economic sector in 2009

This diversification of activities sector is a real strength for the region, in order to attract new investors. Indeed according to Ernst & Young survey of 2009 «Reinventing European growth», it is assumed that investors, are more confident to invest in global cities, as they are culturally diversified, with different activities sectors. Indeed, still according to Ernst & Young, these global cities are more likely to recover from an economic crisis. Even if this survey shows a large domination of New York and London, Paris is still considered by 113 out of 809 international business leaders as the best city in the world able to rebound in a crisis context²⁶.

The following graph shows the entire ranking published by Ernst & Young:

²⁵ Ernst and Young, Reinventing European growth, 2009, P.P 33 ²⁶Ibid, 2009, P.P 33

²⁷Figure 2 : Global cities that have the best ability to rebound in a crisis context

Indeed Paris region represents many advantages regarding to its economic structure. Regarding public and private expenditure, €16.4 billion have been spent in R&D in 2008 (Vs. €15.8 billion in 2007) which ranks Paris on the top of European regions in term of investment research (which represents 143,800 workers). Indeed, by splitting up this amount into public and private, we see that private expenditure largely dominates the total money spent (€10.7 billion out €16.4 billion including 86.900 employees), while public research spent €5.7 billion (representing 57.900 employees)²⁸.

In 2010, Paris Ile-de-France defined nine competitiveness clusters (they were all the result of a strategy launched in 2005 by the government to gather companies work, research centres and training bodies). These nine competitiveness clusters were organized through nine different entities: Advancity, ASTech, Cap Digital, Cosmetic Valley, Elastopole, Finance Innovation, Medicen, Mov'eo and Systematic. In 2010, this strategy can be credited of 1000 projects financed, which represent €3.210 million (€1.230 million were from public funds).

²⁷ Ernst and Young, Reinventing European growth, 2009, P.P 28

²⁸ Paris Region Economic development agency, Paris Region Key Figures, 2011, PP.13

Paris is more advanced in term of sustainable development compare to the others major cities in the world, in 2010 97 projects were financed by public funds (€87 million Euros out the total investment of €200 million).

The second competitiveness cluster of Paris is named ASTech, and concerns the business of aviation, and space transportation (EADS is implemented in the region of Paris, and its space transportation based in the town of Les Mureaux).

The sector of digital content technologies is also really important in the region of Paris, as €600 million have been invested in the different projects concerning this sector (€275 million were from public funds), and is ranked as the first sector in term of number of projects in which the region invested in (300 projects out a total of 1.032 projects).

Ile-de-France region is also considered in the world as one of the most advanced in cosmetic. Indeed with many companies leading on this sector on the global scale (L'Oréal, Pierre Fabre or LVMH), the region can be considered as a cosmetic valley (in 2010, €110 million were invested in this sector).

The fourth sector composing the nine clusters is the research of rubber and polymer, with a total investment of €23 million.

Paris also insists on the development of the financial sector within its borders (through the creation of Finance Innovation). Indeed, the different sectors concerning the financial markets (banks, investment companies, insurance, investment management, or any other services related to the financial sectors), have benefit of an investment of €17 million for 12 projects of research.

The seventh entity (Medicen Paris Region) is working on the innovative therapies and advanced technologies in healthcare).This sector represents an investment of €330 million (€157 million was invested by the region).

Regarding the importance of French car industry on the economy, it seems logical to see the different investments done on the automotive sector, public transport, road and also the environment (this sector represents the second biggest investment in value (€700 millions, public investment represent €190 million of this amount).

The last and ninth entity created (Systematic Paris Region), concerns many sectors (free and open source software, security and defense, telecom), and represents by far the most important part of the total investment (€1.100 million, with a public investment of €420 million)²⁹.

Regarding to these investment amounts, we can easily see the interest of the region to mainly focus on
systemic topics, by financing researches in IT sector, as it is a growing market which can generate an

²⁹ Paris Region Economic development agency, Paris Region Key Figures, 2011, PP.13

economic growth to the entire economy. It is also clear that the region wants to be considered as the leading global city in term of «Green» practices and sustainability. Indeed this «new» market is considered as an essential economic generator by Paris Ile-de-France, which wants to be considered as one of the first mover.

In 2001, Porter explained the influence of the territory on the innovation trend. Indeed he explained that some regions will be able to offer a high level of innovation in a specific domain, and a low level of innovation in others domains. Porter explains these differences because of the location, the history, the culture which all impact the economic clusters of the cities³⁰.

Kotler qualify this specialization in certain sector of the economy as essential for a city in order to be attractive, to become more competitive regarding to this sector of activity, and generate more attractiveness to the foreign investors³¹.

Nevertheless, Paris region knows many difficulties in term of structure, which weakens Paris in the competition of the global cities. In Europe for instance, a strong and old battle with London has shown the advantages but also the limits of Paris in this competition. Berlin is also becoming an important competitor to Paris on the European cities battle.