VZCZCXRO9979
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHFR #1075/01 0790859
ZNR UUUUU ZZH
P 200859Z MAR 07
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC PRIORITY 5772
INFO RUCPDOC/USDOC WASHDC PRIORITY
RHEHAAA/WHITE HOUSE WASHDC PRIORITY
RHMFIUU/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEAUSA/DEPT OF HHS WASHDC PRIORITY
RUCNMEM/EU MEMBER STATES  PRIORITY

UNCLAS SECTION 01 OF 03 PARIS 001075 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
WHITEHOUSE FOR OSTP 
HHS FOR INTERNATIONAL AND PAS TO NIH 
STATE FOR EUR/WE, EB, OES/PCI, STAS 
STATE PASS NSF AND NASA 
USDOC FOR ITA AND NIST 
USEU FOR SMITHAM 
 
E.O. 12958: N/A 
TAGS: EINV ECON ETRD ECPS EAIR ENRG EIND TNGD TRGY
TSPL, PGOV, FR 
 
SIPDIS 
 
SUBJECT: FRANCE?S COMPETITIVENESS CLUSTERS 
 
REF: 06 PARIS 7882 
 
¶1. (SBU) Summary:  The GOF is promoting the establishment 
of competitiveness clusters ("poles de competitivite" in 
French), combining the efforts of enterprises, research 
entities, and higher education institutions to develop 
technologies into products with practical applications. 
The GOF hopes to provide jobs and strengthen regional 
economic vitality in the process.  While previous regional 
development policy focused on redistributing resources to 
less prosperous regions, France is shifting its emphasis to 
improving competitiveness, promoting innovation, and 
fostering public-private partnerships to generate 
development.  The GOF is providing seed money to clusters 
until their own commercial projects can make them self- 
sustainable.  The GOF has already allocated one third of 
the earmarked 2005-2007 budget of 1.5 billion euros (USD 2 
billion).  Competitiveness clusters exist in technologies 
in which the USG and U.S. private sector have key 
interests:  alternative energy fuels such as biomass and 
bio-diesel, information and communications technology 
(ICT), biotechnology, and aerospace (see septel).  France 
has established 66 such clusters.  The top ("world class") 
poles are in the aerospace, agro food sector, ICT 
manufacturing, transportation, biotechnology, and energy. 
The OECD initial evaluation of these clusters is positive, 
while some analysts caution against too much reliance on 
state-led initiatives.  End summary. 
 
¶2. (SBU) Econoff recently spoke with Ministry of Economy, 
Finance, and Industry (MINEFI) General Directorate for 
Enterprise Technological Partnership Department Asia and 
Americas Bureau Head Alain Griot.  This cable has 
information gleaned from that conversation, information 
provided by APP Toulouse, and public sources. 
 
What is a Competitiveness Cluster? 
================================== 
 
¶3. (U) In December 2002, France launched a wide-ranging 
industrial strategy, particularly focused on research and 
development (R&D) and aimed at increasing its industrial 
competitiveness in the changing global economy. France?s 
Interministerial Committee for Planning and Urban 
Development (French acronym CIADT) agreed to implement the 
policy and defined a series of measures to promote 
competitiveness clusters in 2004.  Competitiveness clusters 
aim to create synergies between businesses, higher 
education hubs, and research units to engage in R&D 
projects that have international applications.  Their aim 
is to spark growth of industrial activities, provide jobs, 
and strengthen regional economic vitality. 
 
¶3. (U) In September 2004, the CIADT launched a call for 
projects that would form the first set of clusters working 
on technologies and industrial activities in which France 
is specialized or has potential.  Based upon public-private 
partnerships, eligible proposals may involve businesses, 
research centers and higher education hubs, financial 
institutions, regional authorities, France?s central 
government and Europe.  CIAT received 105 applications, and 
by July 2005, established and provided seed money to 66 
clusters. The response to another call for projects in 
early 2006 (more than 200 applications received) showed the 
increasing interest of private companies and research 
entities for this new mechanism. 
 
GOF Providing Seed Money 
======================== 
 
¶4. (U) The GOF is providing seed money to clusters until 
their own commercial projects can make them self- 
sustainable. The GOF has already allocated one third of the 
earmarked 2005-2007 budget. Over the three year period, the 
state is allotting 230 million euros (USD 302.5 million) 
per year directly from various ministries, 170 million 
euros (USD 223.6 million) per year through several 
independent agencies such as the Agence nationale de la 
recherche (National Research Agency), and 100 million euros 
 
PARIS 00001075  002 OF 003 
 
 
(USD 131.5) per year through fiscal exemptions.  The 19 
cluster R&D projects funded in 2005 received 27.25 percent 
of their funds through state aid, leaving 72.75 percent of 
the total to private enterprise.  Forty percent of private 
sector beneficiaries are small and medium enterprises 
(SMEs). 
 
How Clusters Work 
================= 
 
¶5. (U) Even though the French government approves and 
monitors every cluster, each one is run autonomously.  It 
is responsible for its own management, development, and 
decision-making.  A financing committee, comprised of 
regional as well as central government representatives, and 
a scientific committee, made up of central government 
representatives and experts in each cluster?s particular 
field, oversee and evaluate performance and efficiency.  In 
July of 2008, the government will evaluate the success of 
the cluster policy.  A scoreboard will be published, 
displaying the number of large companies, SMEs, and jobs 
that make up each cluster, the number of patent 
applications, scientific publications, new public and 
private R&D collaborations, added value for cluster 
companies, market share, and finally the number of jobs 
created. 
 
Classification of Clusters 
========================== 
 
¶6. (U) Three cluster subcategories exist: world class, 
internationally-oriented, and regional.  These clusters are 
classified based on their international visibility, foreign 
participation, and potential for profitable international 
applications.  The "world class" clusters span the 
aerospace, biotechnology, communication, ICT, and 
transportation sectors.  Among the 66 clusters, 16 have a 
global orientation.  Competitiveness clusters, however, are 
not only intended for emerging technologies but also for 
more conventional fields as well as more mature sectors 
(such as automotive and aviation industries and health). 
 
U.S. Interest and Involvement 
============================= 
 
¶7. (U) Competitiveness clusters exist in technologies in 
which the USG and U.S. private sector has key interests: 
alternative energy fuels such as biomass and bio-diesel, 
information and communications technology (ICT), and 
biotechnology.  The secure communications cluster in Sophia 
Antipolis boasts participation from Cisco, Hewlett-Packard, 
Honeywell, Intel, and Oracle.  Telecommunications equipment 
manufacturers such as Motorola and Qualcomm have also made 
significant investments.  Xerox participates in the Image, 
multimedia and digital life (IMVN) cluster of the Ile de 
France region, which conducts research on knowledge 
management and engineering, image and sound, video games, 
digital access to cultural heritage and digital life, and 
in the microtechnologies, nanotechnologies and software 
cluster (Minalogic) in Grenoble, which aims to develop new- 
generation miniaturized chips and embedded software. 
¶8. (U) Energy is the focus of several clusters.  Dijon and 
Pont-Saint-Esprit are focusing on nuclear technology, such 
as how to recycle nuclear waste.  Grenoble is developing 
renewable energy technology, such as biomass, solar cells, 
and wind energy.  The cluster has announced 115 projects 
and has initiated work on 53, which have been financed at 
54 million euros (USD 70 million.)  The cluster includes 
105 actors including 27 industrial groups and 31 small and 
medium sized enterprises (SMEs).  The cluster cooperates 
with firms in Japan, the United States, Germany, and China, 
but has plans to increase international collaboration. 
Cadarache is also developing technologies that do not emit 
carbon dioxide, including hydraulic, nuclear, wind and 
solar power.  Perpignan is trying to apply these 
technologies to architecture to develop low energy 
consumption buildings. 
OECD and KPMG Studies of the Competitiveness Clusters 
============================================= ======== 
 
PARIS 00001075  003 OF 003 
 
 
 
¶9. (U) The territorial review of France published by the 
OECD in April 2006 provides the first international 
appraisal of the French competitiveness clusters measure. 
The OECD generally welcomes the new regional policy but has 
detected a number of potential threats.  The OECD warned 
that institutional actors should be transparent and well 
coordinated. At present a multitude of actors with ill- 
defined roles, including the central government, the 
regions, and other public administrations, creates the 
potential for confusion.  The OECD cites that there is a 
risk of inefficiency as funds are spread over a large 
number of clusters.  Furthermore, the governance structures 
of clusters should provide for an appropriate involvement 
of SMEs.  Universities should better promote their research 
results and increase their autonomy in order to be on par 
with enterprises when cooperating in clusters. 
 
¶10. (U) A December 2006 KPMG study noted that the clusters 
needed a more strategic vision regarding the international 
marketability of their projects, improved cooperation among 
the various participants, and improved knowledge of 
potential markets.  According to KPMG, clusters that 
focused on projects with international applications had 
more visibility and more interest, although too many of the 
clusters lacked such an international dimension.  The 
success of projects originating from the clusters would 
depend on knowledge of the potential markets, including 
their size.  The addition of business schools, absent in 
all the clusters, would help add such expertise. 
 
¶11. (U) The KPMG study showed that participants in the 
clusters thought they had not developed as many concrete 
applications (FOR FUNDING R&D?  CLARIFY) as they expected. 
Development of practical applications was also hampered by 
the reluctance of participating firms to share innovations 
with other firms participating in the same clusters.  On 
the upside, most involved in the clusters anticipated that 
they would maintain the same level of participation over 
the next five years.  Nonetheless, KPMG predicted that 
several clusters would likely fail over the next several 
years, and about fifteen had serious problems. 
 
¶12. (SBU) Comment:  The French focus on building public- 
private partnerships and breaking down the barriers that 
prevent the commercialization of research appears well- 
founded.  As indicated above, the clusters program presents 
opportunities for U.S. firms, including potential funding 
for R&D conducted in France.  What is less clear is whether 
the kick-start provided by the program will be sufficient 
to foster development of the kind of informal 
entrepreneurial networks (in regions where they do not 
already exist) that are common to truly effective clusters. 
 
¶13. (U) Main Reference Website: 
 
For more information on clusters in English or French, 
including locating specific clusters and industries and 
finding financial support, visit: 
www.competitivite.gouv.fr. 
 
STAPLETON