Sat, 07 July 2018
As we prepare to celebrate French National Day, the French Embassy’s Economical and Commercial Department outlines the historic and current commercial relationship between France and Bahrain.
What brings French people to the Kingdom? Is there a notable business presence?
France has a history of commercial presence in Bahrain stretching back decades. The jeweller Jacques Cartier visited Shaikh Mujbal in 1911. And, right after independence, Cegelec set up an entity in the country, in 1971, while Paribas and BNP opened branches in the Kingdom in 1975 and 1976, respectively. In 2015, France’s outward FDI (foreign direct investment) stocks in Bahrain amounted to USD906 million according to the IMF (International Monetary Fund), making France the eighth largest global investor in Bahrain with 3.2 per cent of total FDI stocks.
The trend of FDI flows is positive as well: France’s outward FDI flows grew a strong 110 per cent between 2014 and 2015. The location choices of French firms underlines the comparative advantages enjoyed by Bahrain: an attractive regulatory and fiscal environment, reliable logistics and transport structures turning the country into a hub for the region, a highly accessible Saudi market, competitive operational costs and a qualified labour force.
The sectoral breakdown of the 35 subsidiaries and representative offices in the country shows a healthy distribution between the secondary and tertiary sectors: energy, industry, construction, mass retail, financial services and tourism. While the lack of restrictions regarding the entry mode of corporations into the Bahraini market sets the country apart (the Kingdom is the only country within the GCC to allow full foreign ownership of the capital for 98 per cent of its sectors), in the mass retail segment, Carrefour opted for a franchise contract with the Emirati group Majid Al Futtaim, which allows the French entity to take advantage of its franchisee’s knowledge of local market conditions and managerial expertise, all the while hedging against moral hazard.
Among major French investors, Engie’s thermal power and desalination plants generate up to 70 per cent of the country’s electricity and drinking water; Technal Middle East produces aluminium profiles in partnerships with Balexco and records annual revenues of USD20 million; and AccorHotels has adopted management contracts with four investors for four hotels representing the group’s leading brands: Sofitel, Novotel, Mercure and Ibis.
What are the latest trade figures for the two countries?
French-Bahraini bilateral trade in goods reached a year-on-year growth rate of 64.9 per cent from October 2016 to October 2017, attaining USD189.4 million. Cosmetics (5.4 per cent), pharmaceuticals (3.9 per cent) and electrical equipment (4.9 per cent) still dominate Bahraini imports of French products, with the latter registering a 103 per cent increase year-on-year. Lifting and handling equipment as well as electric motors, generators and transformers present the steepest growth, with 192.4 per cent and 165 per cent respectively, bringing their share of French exports to Bahrain to 3 per cent and 2.8 per cent. Regarding Bahraini exports, there has been a dramatic increase year-on-year, from USD52.4 million to USD149.3 million (+184.6 per cent), overwhelmingly driven by the surge in exports of petroleum refinery products. If the trend follows a similar pattern over the last two months of 2017, it will be the first time since 2013 that Bahrain has a bilateral trade surplus with France.
Is this an area that could be improved, and if so, how?
What is striking is that the fields that have been identified by the Kingdom as decisive for its medium-term future are fields where France has a wealth of expertise: urban planning, construction, renewable energy solutions, fintech, et cetera. Our bilateral relationship could certainly benefit from an accrued cooperation between the various actors in charge of export promotion (Business France Export, the French Chamber of Commerce and Industry in Bahrain, Bpifrance ECA, the Bahrain Development Bank) and investment attraction (Business France Invest, Bpifrance Investissement, Economic Development Board) in our two countries.