By virtue of a steady flow of French investments into the Kingdom, France is now the third largest foreign investor with $1.2 billion worth of 67 joint venture projects to its credit in the Kingdom.
Since its inception, Saudi Arabian General Investment Authority (SAGIA) has granted France 27 licenses worth more than $1 billion. These projects cover different fields such as power, telecommunication, industry, dairy, oil and technology.
An agreement for the reciprocal protection and promotion of investments between France and Saudi Arabia was signed on June 26, 2002 in the Kingdom during the visit of the French minister for foreign affairs. Subsequently, it was ratified by both parties at the beginning of 2004. This agreement would further secure and encourage French investment in the Kingdom.
French presence in the Kingdom had long been heavily concentrated in the field of services, with a success story in the banking sector: the Crédit agricole-Indosuez investment in Banque Saudi Fransi (BSF), Saudi Arabia’s 5th largest bank and Saudi Arabia’s 21st largest company in 2001, whose French partner holds 31.1 percent of the shares since 1977 used to account for 75 percent of French FDI in Saudi Arabia, i.e. $150 million out of a total stock of $198 million.
French presence in the industrial sector — including petrochemicals — long remained too limited. Three French industrial investments that were made prior to June 1999 can be mentioned: Stesa, a subsidiary of Thales that specializes in the telecommunication sector ($4.6 million of French capital), Schneider, that locally manufactures electrical equipment ($ 1.6 million of French capital) and Sigma Paints, a subsidiary of SigmaKalon of the TotalFinaElf Group ($1.3 million of French capital). In the field of services to the oil industry, the Compagnie générale de géophysique (CGG) has created a subsidiary in the Eastern Province, Argas, that undertakes seismic campaigns ($4.7 million of French capital). This company ranked at the 87th level of Saudi companies in 2001 as far as turnover was concerned.
With the adoption of a more attractive foreign investment code in April 2000 and the establishment of SAGIA, French investments in the Kingdom have strongly improved and diversified. October 2000 saw the takeover of a large stake of Al Safi by Danone with a total French investment $200 million.
It was followed by subsequent industrial investments of Perrier in Al Manhal (mineral water) and of Saint-Gobain in Al Obeikan (technical textiles). At the end of 2002, Systra, one of the largest international engineering firms for rail and urban transport, received a license for close to a billion dollar investment in the railway sector.
Between April 2000 and August 2003, SAGIA issued 35 licenses to French investors for a total of more than $1 billion.
Statistics issued by the French central bank indicate that the level of French Foreign Direct Investment (FDI) in Saudi Arabia was 475 million euros at the end of 2001 (more than $600 million). According to the same source Saudi direct investments in France reached 441million euros at the end of 2001.
The implementation of two large-scale projects will further boost the existing bilateral trade. Total signed together with Saudi Aramco and Shell on Nov. 15, 2003, a $ 2 billion worth agreement to exploit and explore gas in Rub’Al Khali. Furthermore, Bouygues is preparing the first ever BOT project in Saudi Arabia with a total investment of $100 million for the establishment of a high level recreation center in Jeddah.
BNP Paribas, one of the biggest French banks, has been given license to operate in the Kingdom. The bank will deal in corporate banking mainly to assist project services.
Early this year, Accor, Saudi-French company for hotel management signed an agreement for the establishment of a chain of hotels in the Kingdom. In addition to its new ventures in the capital, Accor will be the first French hotel to open its outlets in the holy cities of Makkah and Madinah.
France is also the sixth largest trading partner of the Kingdom with a bilateral trade of 3.5 billion euros. French exports to the Kingdom are valued at 1.4 billion euros, while its imports from Saudi Arabia are estimated at 2.1 billion euros.
Intermediate goods rank first amongst French exports; they are followed by consumer goods, agroindustrial goods and capital goods. Main French exports include barley, perfumes, poultry meat, pharmaceuticals, electrical equipment and clothing items and accessories.
French imports are mainly made out of energy products. Crude oil, and for a small but progressing share, refined petroleum products make up for almost 95 percent of French imports from Saudi Arabia. The Kingdom ranks as France’s third supplier of crude with a market share that is now set at around 13 percent.