French eyes turn to region

MARSEILLES // French government and business leaders have always kept an eye out for opportunities to trade with the Middle East and India and a new series of deals involving trains, planes and automobiles suggest they have lost none of their focus.

Commercial relations with the UAE are particularly buoyant, with the official Business France investment agency reporting that French exports to the Emirates tripled in 10 years to €4.1 billion (Dh16.89bn) in 2014.

Bilateral trade between the nations reached €5.17bn in the same year, placing the UAE behind only Saudi Arabia as France’s major business partner in the Arabian Gulf. Transport equipment (28.5 per cent) and consumer goods excluding food (25.8 per cent) figure most prominently in the export items.

If France is eager to consolidate ties with the UAE as a strategic economic partner, it has also been busily building or reinforcing its relationship with other countries in the Middle East.

Business France smartly took advantage of the thaw in Iranian-western relations to appoint a representative, based at the French embassy in Teheran, to help companies in their efforts to establish presence in the local market.

That initiative, announced in September last year, concerned mainly small to medium sized businesses. France’s big players in world commerce do it either for themselves or with a helping hand from the government.

In recent weeks, several major contracts have surfaced to show the French appetite for exporting its products to neighbouring regions.

The engineer Alstom is among those that have been active in the Gulf. Production has started in the Polish city of Katowice of 69 trains for Saudi Arabia’s Riyadh Metro.

The six-line network, more than a quarter complete, will cover 85 stations and will be unaffected by the sharp fall in oil prices, Waleed Al Akrash, the project manager, told the Saudi Gazette in January.

Alstom says the first three of the two-carriage trainsets would be delivered to the Arriyadh Development Authority (ADA) next year.

The work for the Riyadh transport system is a significant element of Alstom’s order book. The company, present in more than 60 countries and employing 32,000 people worldwide, recorded sales of €6.2bn and took €10bn in new orders in the 2014/15 fiscal year.

Elsewhere in the region, the French motor manufacturer PSA Peugeot has signed a new joint venture agreement with Iran under which it will invest €400 million over the next five years to produce, with the largest Iranian car maker, Iran-Khodro Company, Peugeot 208, 2008 and 301 models fitted with “latest-generation” engines.

Peugeot is firmly established in Iran, with an estimated four million of its vehicles on the road, and the sanctions hit the company hard. Iran was its biggest market after France

As part of the new deal, according to Teheran, Peugeot has also agreed a package of €427m in debt waivers, discounts and bonuses in compensation for losses arising from its withdrawal from the Iran market when sanctions were imposed.

Sales were halted in 2012 when the punitive measures were extended to the automobile sector but most sanctions were lifted in January following the UN International Atomic Energy Agency report that Iran had now met all its obligations.

Peugeot told Reuters “the deal signed with Iran is a good and balanced one”. With its partner Citroen Peugeot and Khodro aim to reach annual production levels of 200,000 vehicles using Iranian-manufactured parts, with the first cars due on the road next year and 30 per cent earmarked for export.

In India, meanwhile, France’s socialist president François Hollande enjoyed the fruits of a flag-waving state visit to the country last month.

An inter-governmental agreement was signed after months of negotiations for India to buy 36 French-built Rafale fighter planes, valued at an estimated US$9bn, as part of the country’s US$150bn military upgrade.

Mr Hollande had hoped to seal the deal, already high on the agenda when the Indian prime minister Narendra Modi, visited Paris last year, while in New Delhi. But both men indicated that there was still work to do on finalising financial terms.

In fact, it took government-to-government intervention to rescue the deal after commercial negotiations initially failed. Even then, the contract is a diluted version of the original plan to supply 126 Rafales. The lower figure is intended to meet the Indian air force’s more urgent needs, presenting a robust defence profile in dealings with China and especially Pakistan.

After the president’s return to France, Eric Trappier, the chief executive of the warplane’s maker Dassault Aviation, sought to dispel any lingering doubt, saying he expected agreement on price by the end of this month. Deliveries of the jets – whose French name translates literally as a “gust of wind” – will start in three years, with completion of the contract due in 2022.

“The Rafales are less expensive than the competition,” Mr Trappier told the Europe 1 radio station. “They’ve won the first round in India against Russian and US planes. It’s Indian finance that is paying; even if there is some bargaining on price, this is not a [sale on] credit but cash.”

A joint Franco-Indian communique issued after the visit, which coincided with India’s 67th Republic Day celebrations, spoke of a “trusted and valued” friendship. A French military contingent took part in the official parade, making France the first foreign country granted such an honour.

France Business told The National more than 400 French companies employing 300,000 people now operate in India. France is the third-largest foreign investor in the country, with a total stake of about €20bn.

“France is a special friend,” Mr Modi said. “Eighteen years ago, France was the first country we signed a strategic partnership with. We are now here to take it higher.”

Other French manufacturers are also capitalising on the warm relations. Mr Hollande said a deal under which Areva will build six nuclear reactors for India should be signed within a year, while Alstom has reached agreement to build 800 locomotives for Indian Railways.

Michel Sapin, the French finance minister, estimates French companies will invest $10bn in India in the next five years, making France the major participant in Mr Modi’s “Make in India” drive to boost India’s manufacturing sector.

Facing high unemployment and manufacturing caught between contraction and growth, with GDP only now beginning to register modest improvement, Mr Hollande needs all the good news he can get with presidential elections a year away.

At least the Middle East and India offer encouragement. But concessions to Teheran, and scaled-down military sales to India, show compromises have to be made.

But to borrow from the school report metaphors so favoured by French economic commentators, peut mieux faire – could do better – is a welcome improvement on mauvaise eleve, or bad pupil.

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