The Brest Naval Instruction Center celebrated the promotion to the first officer's rank of 10 Royal Saudi Naval Force cadets from the SAGEMA 2007 edition at the center's parade ground in Brittany. The picture shows young SAGEMA officers during the raising of the French and Saudi colors. RIYADH — BILATERAL relations of Saudi Arabia and France, in all fields, can be described as outstanding. The last five years have been especially rich and challenging. France's commitment is to keep working in that positive direction. In 2011, trade (imports and exports) between France and Saudi Arabia showed a very marked increase (17%) totaling 7694 million euros compared to 6586 million euros in 2010, despite a decline in the value of French exports. The Kingdom confirms its position as the first partner of France in the Middle East.
Impact of high oil prices Rising oil prices have significantly impacted on France's imports. The structure of French imports from Saudi Arabia is traditionally marked by the preponderance of petroleum products and petrochemicals (98%, or 4481 million euros in 2011). It is therefore mechanically that rising oil prices boosted the amount of imports to a record high in 2011 (4556 million euros, or 65.4% increase compared to 2010). With regard to crude oil, our bill came to 3992 million euros (88% of imports), an increase of 65.7% over 2010. “The price effect” exerted on our invoice by the increase in prices was in 2011 combined with a “volume effect” (18% increase in the volume of oil imported by France from Saudi Arabia to 7 Mt in 2011) to compensate for the interruption of supplies from Libya in March 2011. Saudi Arabia now ranks 4th in France's suppliers of crude oil and covers 11.2% of French needs (against 6.7% in 2010). In the wake of higher oil prices, prices of almost all products of the petrochemical industry have increased. Higher prices are clearly visible on French imports of refined products (236.4% to 275 million euros) and chemicals (76.1% to 63 million euros). Only our bill of plastic products remains stable (up 4.1% to 151 million euros due to excess supply in the second half of 2011, particularly in the Asian market, which has drawn international prices downward. Given a price and import volume of crude stable compared to 2010, France's trade with Saudi Arabia would have generated a surplus of 385 million euros in 2011. France's exports went down by 21.2% in 2011, mainly due to the downfall in sales of aircraft equipment. France's main export items, which fueled its trade surplus in 2010, are down in 2011. France's exports of aircraft and spacecraft and pharmaceutical preparations were alone 50% of French sales to Saudi Arabia in 2010. In 2011, the cumulative decline in sales reached 1,165 million euros. Exports of aircraft and spacecraft, consisting of Airbus aircraft sold to Saudi Arabian Airlines and NasAir and the delivery of a satellite to Arabsat, fell by 66.6% (541 million euros against 1619 million euros in 2010) and represented only 17 percent of our exports to Saudi Arabia (against 40% in 2010). Similarly, sales of pharmaceutical preparations are down 22.7% to 289 million euros against 374 million euros in 2010. Other sectors, however, showed excellent performance and confirmed France's strong position in growing business segments. Saudi Arabia is undergoing a period of sustainable economic development, and has, moreover, high government spendings that support imports. Additionally, population growth is a dynamic engine of consumption. Many of France's industries benefit from it. Sales of mechanical equipment, electronic, electrical and computer equipment, which represent 28% of our exports (879 million euros), were up 10.1% annually since 2006 and 21.3% compared to 2010. Sales of instruments and appliances for measuring, testing and navigation (17.8% to 141 million euros) and electricity distribution and electrical control equipment (10.3% to 108 million euros), of communications equipment (65.3% to 75 million euros), and other electrical equipment (493% to 47 million euros) account for most sales of this product category. But sales of all kinds of machines — machine tools, general-purpose machinery and special purpose machinery — are usually very low, but have significantly contributed to the good results of that position in 2011 with an increase of 308% to 1025 million euros against 25 million euros in 2010. The need for food products in Saudi Arabia is also highlighted by strong growth in exports of agri-food products, which recorded an increase of 40.2% to 410 million euros. Sales of poultry meat (48.9% to 212 million euros) are the most dynamic. Exports of metal products and metal also increased (10.9% to 266 million euros) mainly due to higher sales of pipes and tubes (77.3% to 104 million euros, after rising 47.5% in 2010). Finally, French sales of perfumes and toiletries continued to increase (16.2% to 125 million euros). Year 2011 reveals a real diversification of French export items (no position is more than 20% of French total exports, while in 2010 aviation sales accounted for 40% of the amount of our exports), which is a stronger guarantee of sustainability of French exports. If one believes the developments of recent years and needs to come for Saudi Arabia, France is well positioned in growing segments such as food, consumer goods and mechanical and electrical equipment. To improve its performance in Saudi Arabia, France must strive to increase the number of firms exporting in the country (between 2000 and 2009, there was indeed a 16% decrease in the number of French companies exporting to Saudi Arabia and 23% of SMEs). On the other hand, the number of French subsidiaries in KSA is growing (70 up to date employing 20000 people).
French FDI in Saudi Arabia With a stock of 1.4 billion euros at the end of 2010 according to the Banque de France, or 0.16% of the stock of French investment abroad, Saudi Arabia ranks as the 48th largest destination of French FDI. The figures put forward by Saudi Arabia — $15.3 billion of French investment — place France as the third largest foreign investor in the Kingdom. The French investment flows to the Kingdom are regular but improvable (between 100 and 200 million euros per year) according to the Banque de France, despite a strengthening since the adoption in April 2000 a new foreign investment code. According to official Saudi statistics, they exceed $2.5 billion per year for three years. The sectorial breakdown of French investments in the Kingdom underlines their high concentration in the services sector (1.1 billion euros), particularly financial services representing 73% of the total stock of investment (997 million euros). This situation is related to the participation of 31.1% stake by Calyon Group in Banque Saudi Fransi, subsidiaries of BNP Paribas and Societe Générale, and the presence of AXA in the insurance industry and Naso in insurance brokerage. In the distribution sector, Carrefour, through its subsidiary company formed with the Dubai-based Majid Al Futtaim (MAF), is well established in the Kingdom. GDF Suez has also invested heavily in the Kingdom as part of IWPP schemes. Its share in the project Marafiq Jubail (water production and electricity), worth $3.8 billion, reached 20%, while the group also owns 20% of the power plant Riyadh PP11 (total investment of $2 billion). In the service sector to the oil industry, CGG-Veritas created a subsidiary, Argas, specializing in seismic surveys ($4.7 million of French capital). Still not represented enough in the Saudi industry according to its domestic strength, France has so far kept out of important sectors, such as petrochemicals, which has yet attracted the bulk of FDI in Saudi Arabia. Total, which sold its interest in gas exploration in late 2003, acquired a stake of 37.5% in the construction of a refinery at a total cost of $12 billion. Four other investments in the industrial area can be cited: Stesa, a subsidiary of Thales, specializing in the telecommunications sector ($4.6 million of French capital), Schneider, which manufactures electrical equipment ($1.6 million of French capital), Saint-Gobain who produces technical textiles ($24 million), and Air Liquide ($450 million for one unit of hydrogen production in Yanbu). In the food sector, Danone took over in October 2000 the majority of the capital of Al Safi Dairy ($47.6 million). The major French companies will be relevant to support the economic diversification policy implemented by the Kingdom. First, they want to work closely with their Saudi partners. Secondly, their significant expertise in many different fields that they are willing to transfer can be considered as an opportunity by the Saudi authorities. Air and land transportation, oil and petrochemicals, electricity, nuclear, infrastructure and industry are among the most promising bilateral cooperation sectors. French companies, world leaders in their fields, are therefore strongly willing to sustain and develop the flow of investments in industry with projects such as the ones from Rhodia in the petrochemical sector (Ras Tanura and Jubail projects), EDF Energies Nouvelles (solar farm) and Saint Gobain (solar industry components) in the solar energy sector, Air France (aircraft maintenance), Air Liquide (hydrogen production) and Michelin (tire plant). In the nuclear sector, French industry leaders (Areva, EDF) are joining their efforts to propose the best solutions to help Saudi Arabia develop its nuclear development project. Saudi FDI in France Late 2010, Saudi investors held 544 million euros of FDI in France, ranking 28th among foreign investors in the country. There is a strong concentration of Saudi capital in the real estate sector, where nearly 75% (401 million euros) are invested. Saudi FDI flows into France remain, overall, relatively low.Saudi-French Business Opportunities Forum A road show similar to the US-Saudi Business Opportunities Forum will be organized in France in November this year in cooperation with the Ministry of Commerce and Industry. This high-level gathering of senior officials and corporate leaders from Saudi Arabia and France is designed to increase understanding and business interchange between the two nations. In light of Saudi Arabia's growing role in global financial and economic issues and the need for a continued collaborative Saudi-French relationship in these areas, this two-day event will be a major platform for senior business people and high-level government officials from both countries to explore opportunities for greater economic cooperation, as well as to develop new and lasting business ties. — SG
