Trade & Export Middle East - Country Focus - France

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focus FRANCE

FRANCE

BILATERAL TRADE

Industry watch

Interview

MARCH 2013

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country focus INVEST IN FRANCE AGENCY

Courting suitors Created in 2001, the Invest in France Agency (IFA) is responsible for promoting, prospecting and facilitating international investment in France, and for the economic attractiveness and image of the country. Aparna Shivpuri Arya spoke to David Appia, Chairman of Invest In France Agency, to get his expert opinion on the attractiveness of France as an investment destination.

D

avid started the discussion by highlighting two important issues – simplification and stabilisation of the legal and regulatory environment.

“Simplification has always been an important objective. Making it easier for companies to operate and do business in France is the motto, so much remains to be done,” was David’s honest opinion.

First the notion of stabilising the environment – that is important, particularly, 34

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in the tax field. It is often said by international and French companies that the environment and regulation is too heavy and complex.

The tax code is really huge and thick and streamlining the whole thing is important.

But more than simplification, stabilisation is important because in France they like new measures and keep changing the laws. “So the government for the first time committed itself not to change a number of tax regimes and they chose five important tax schemes and

procedures benefitting the companies and announced publicly that these five tax regimes will not be modified during the government’s five year tenure. That’s really very impressive – quite an innovation here. It’s a tricky issue because the parliament is likely to change the law but the parliament is supporting the government and the government announced that these five things will not be changed.

So it’s fair to assume that there will be no change, and that the government and the

parliament are working together. So that’s an interesting point, introducing more stability in the business environment,” opined David.

This is a part of the national pact for growth, competitiveness and employment.

Number one measure remains in his view the tax credit to reduce the cost of labour and, as important, probably the stabilisation and simplification of the business environment.

Last September, the government convened a large conference on the issue of the way the labour market is organised and the labour laws in general. All stakeholders were invited and joined the conference, and it was decided to ask the representatives of the business community, the professional trade union, and the trade unions representing the employees to discuss together. They were asked to enter into a negotiation to improve the state of play and the existing rules and laws governing the labour market; with two primary objectives – introducing more flexibility into the whole system to make it easier for companies to adjust when confronted with difficult economic environment , more flexibility and for the benefit of workers and employees to introduce more security in the work market or work place.

By doing this, David said that companies will gain flexibility and employees will gain more security, in terms of training, in terms of the possibility to go from one company to another without losing anything in terms of rights and experience. So last September the negotiations started , the government gave the roadmap or four different points that had to be covered and this was accepted as a starting point or basis of negotiations by all participants and they were left on their own – they negotiated on their own. They started in October, and the negotiation had to be brought to an end by January 11th that was the decision of the government. They were informed by the government that in the event that they were not able to reach a decision by January 11th, the government would take it as their responsibility and introduce a bill into the parliament.

Everyone expected success, and they managed to come to an agreement on January the 11th. “And I am very confident that the new

law will respect this very carefully drafted balance and that the French labour laws will be amended and improved as decided upon by the stakeholders. This is to be achieved by next probably April or May. And this is something very important because as you must have heard, that France was considered as a country where the labour market was too rigid,” pointed David.

“I should add one word, as an agency we are very actively involved in attracting foreign companies, one more important step taken in January, was that the government adopted a communication strategy to improve the attractiveness of the country. It was first reiterated by the government that France is keen to welcome new companies, foreign companies, is an open country and wants to remain open to foreign investment. That’s the first element in the strategy and it has to be reiterated in every occasion. Second it’s a matter of interest to all members of the

David Appia, Chairman of Invest In France Agency

Since all European countries are working hard on being more attractive to investors, we asked David, for a GCC potential investor, what will be the advantages of investing in France? David, who was

We have the most supportive research tax credit in Europe- it’s a 30 % rebate in all expenditures in R&D. It’s absolutely unparalleled and it benefits almost 2000 companies in France,” was David’s answer.

government because the attractiveness of a country relies on a large range of elements – education, transportation, tax regime and more,” David highlighted.

According to the David, the third initiative by the Government is to ask all stake holders and owners to join their forces and unite and work together to improve the conditions offered by France. That is the third element in the environment which is of great value to them. And they are currently in the process of computing all results for 2012 and they work together with the regions in France.

“We get in touch with the head quarters of the companies, we verify and check whether their decision is solid and whether the investment will take place soon and then we compute and include in the new report and we will very soon,” David proudly stated.

quite amused with our question, said, that recently the Government decided to launch an internal work and it asked a group of five personalities to work on the idea or notion of a national brand mark / brand name “mark de France” and it was felt necessary to look at that in more detail because we have definitely sort of an image abroad which may vary from one country to another for sure but of course the name France means something to everyone, positive or less positive, related to history, to culture to gastronomy and so forth. And it was asked to these experts to try and find some sort of a brand which might encapsulate all positive elements of the image of France abroad.

“I’m starting with this to let you know that we are currently engaged in this MARCH 2013

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country focus INVEST IN FRANCE AGENCY

Change in the number of job-creating foreign investment projects in France (2000-2011)

discussion and this report is to be translated next may ( 1st of May) so I’m not sure what the results are but they are working on that,” remarked David.

“We have excellent infrastructure, roads and IT infrastructure, but is it really what makes France different? Well let’s say it’s clearly an asset. It’s a positive element in the whole picture. Then we do have a central location in Europe at the heart of the European market. If I go to the Website of my sister agencies in Europe, most of them argue that their countries are in the heart of the European market, but it’s true that as far as France is concerned we are at the heart of the market. Geographically we are in the centre of Europe, is it what makes France different? That’s debatable.

What makes it different that as a country we can offer a lot of elements to make it interesting for a foreign investor? In other words the attractiveness is quite coherent and large and substantial. We can offer a lot – good location, infrastructure, good people, high level of technology, very creative workforce, an excellent environment in terms of R&D and 36

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universities. We have the most supportive research tax credit in Europe- it’s a 30 % rebate in all expenditures in R&D. It’s absolutely unparalleled and it benefits almost 2000 companies in France,” was David’s answer.

France also has 71 technological clusters in the country a sort of open eco-systems, in which public and private companies, universities work together and support and develop collaborative.

Moving along, David said that in the last two or three years they have been in contact with an increasing number of foreign companies, especially from Asia, which are keen on reaching the Gulf and Africa and they take France as a base. It relates to the historical link that France shares with African countries.

He also brought to fore a very interesting aspect- that of demography. He said that the demography of a country tells you about the economy of tomorrow and France is well positioned as far as demography is concerned. Companies do include demographics in their benchmarks.

He also added that more and more

companies tell them that they value the position of the country in terms of carbon footprints. “It is not only the companies, but also the country which is involved.

Without trust and confidence, no money will come in since money is put in for longterm and unless there is confidence that won’t happen. That is why we would like to reaffirm that we want foreign investment and we’ll work towards making your life easier. We are eager to welcome you,” remarked David.

We then moved on to our last point – the EU-GCC FTA. Talks have been going on a long time and we wanted to know whether there will an impact of that agreement on trade and investment? David was quite sure when he said, “Yes, certainly so, though it’s difficult to calculate right now since these sort of agreements promote trade and investment by offering mutual concessions.

It will definitely offer a more favourable environment.”

It was impressive to know the work that IFA is doing to promote France as “the” investment destination. And there is no denying that it has done a good job!

Supporting your investments We also spoke to Salim Saifi, who handles the Middle East operations of IFA to get some more details.

How long has IFA been in the Middle-East?

What regions of France are the easiest to do business in?

While we have formally been on the ground for about five years now, the long standing relationship that France and the GCC have enjoyed has existed for decades. We are privileged to continue this relationship.

Our role is to enable local entities that are ready to reach out to the global market to create a European hub and truly become international.

Most generally people are looking at the Paris region. It’s the main economic region of France, above all, companies setting up in the area gain access to vast local, national and European market opportunities, with 495 million consumers. Other dynamic French regions are attracting GCC investors such as Rhone-Alpes (Lyon) and Provence Alpes Cotes d’Azur (Nice and Marseille).

For GCC based companies, I would say the agri-food business has plenty of possibilities. Foreign companies are already highly active in this sector in France, where they account for almost 30% of agri-food output. The turnover of the Halal market is increasing by 10% yearly; the vitality of the market can be explained by demographic factors. There is a very large population of Muslims in France who adhere to the Halal code of practice and therefore constitute a huge pool of potential consumers. In 2010, around Euro 4.5 billion were spent on Halal food products for home consumption, and Euro 1 billion were spent in restaurants.

French hotel sector has high potential to welcome GCC investors, the country is a one of the most preferred destination for GCC: we are welcoming approximately 1 million GCC tourists in France.

Finally, there is also strong interest from GCC companies to set up their European office in France to use the country as a gateway to Europe and as a bridge to Africa.

We work with businesses that have the potential for expansion globally and interest in European markets. In addition, we work with businesses of different sizes that range from SME’s (Small Medium Enterprises) to SWF’s (Sovereign Wealth Funds). As a government agency, all communications with us are strictly confidential and any assistance we provide is complimentary.

What are the best investment opportunities for GCC investors in France?

Who are your key clients in the region? Can you describe some of the work that you do for them?

also informed them on new policies and incentive plans. Today, there are more than 90 companies from GCC doing business in France, employing 3000 employees.

Can you give examples of the work you have done? Can you describe how this work was transformative for your client?

What metrics do you apply for success?

IFA has played an integral role in helping bridge the two regions. For instance, we have assisted companies in several business sectors (ICT, media, energy, retail, hospitality, food) with office openings in different french region. We helped them get in touch with key local authorities that provided them access to a productive and talented workforce. We resolved all types of business queries and put them in touch with subject matter experts. We

Anytime that we are able to create a relationship where we can help local companies meet their international business needs we have succeeded.

France is full of different opportunities for investment across various sectors and we make sure that we engage with companies to ensure that they are leveraging the right opportunities and to their fullest potential.

Generally, anytime jobs are created we have succeeded.

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country focus TOTAL

What lies deep within

Total, the fifth largest publicly-traded integrated international oil and gas company in the world, has shared historic ties with the Middle East and is very bullish on what the future holds for the oil and gas sector. Aparna Shivpuri Arya met Arnaud Breuillac, President Middle East, Exploration and Production Division, in their Paris headquarters to get all the interesting details.

Mr Breuillac, can you give us a brief overview of Total’s upstream operations in the Middle East?

Total started its activities in Iraq in 1924 when as part of World War I compensation, France got a share of the Iraq Petroleum Company (IPC) alongside the British and the Americans. In Iraq, the first discovery was Kirkuk in 1927. We then came to Qatar in 38

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1936, Oman in 1937, Abu Dhabi in 1939, and we celebrated last year 25 years of presence in Yemen.

Today about a quarter of Total’s worldwide oil & gas production comes from the Middle East – 570,000 barrels per day (b/d) in 2011 - and it is a key region to us both as operator and as partner, one of the pillars of the company.

In Abu Dhabi, our production comes mainly from the onshore concession of Abu Dhabi Onshore Company (ADCO) and from the offshore concession of ADMA-OPCO, plus the Total operated Abu Al Bukhoosh offshore field.

In Qatar, through our participation in Qatargas I and II, we have a share of the liquefied natural gas (LNG) business there,

and we are also operator of the Al-Khalij field, which is an offshore oil field. It is worth mentioning that the Al Khalij licence has been extended mid-November for 25 additional years with Total, operator retaining 40% interest alongside Qatar Petroleum.

Total is also involved in oil and gas production In Yemen. Our main asset is our 40% interest in the Yemen LNG company, and we are also the operator of Block 10 located in Hadramaout region, which produced upto 86,000 b/d in 2011 – about a third of Yemen’s total oil production. We are the only major working in Yemen and we are very proud of our contribution to the country’s economy.

In the Upstream segment, we are also present as a partner in Oman, though Petroleum Development Oman, Oman LNG, and the Mukhaizaina block, but we are not operator.

How about Total’s more recent developments in Iraq?

In Iraq, we are a partner with an 18.75 % interest in the Halfaya field development operated by the Chinese national company CNPC. Production on that field started in June 2012 and we completed Phase 1 of the development, reaching First Commercial Production in September 2012 after 90 days above the contractual production level of 70,000 b/d, thus prompting the beginning of the pay back of the investment.

We are now producing around 100,000 barrels of oil per day on Halfaya and the field’s full development is set to reach 535,000 b/d.

This project is going on quite well, in spite of a challenging context in Iraq.

Regarding Iraq, at first we felt a bit frustrated when we got a relatively modest share of the Iraqi reconstruction activity following the first bidding rounds for the development of fields in the South. But we rapidly saw that contractual conditions were not enough rewarding, especially for exploration in the fourth bidding round, which we did not participate into.

The Northern part of Iraq also has significant potential for exploration, and we decided to go for it last summer, acquiring participations in 3 exploration blocks.

We hope that we will make discoveries in the coming year and we don’t want to get involved in the political debate. All we wish

to do is contribute to the development of the Iraqi oil & gas industry in the south and in the north.

Total has been having a historical relationship to the Emirate Abu Dhabi which is getting ready to renegotiate the ADCO onshore concession. Where does Total stand today?

The future of the ADCO concession is a subject entirely managed by the Abu Dhabi national company, ADNOC, and the Supreme Petroleum Council. There are a lot of rumors flying around about this, they have made some statements about where they are in the process, and the fact is we do not know yet.

This being said, Total has been a partner in ADCO for decades and has contributed to the successful development of the onshore fields of Abu Dhabi. Today, we feel that we still have a lot to contribute to our national partner’s objectives for onshore fields both in terms of technology and human and financial capabilities and we hope to be part of the future of ADCO in a mutually beneficial scheme that will lay the foundation for our relationship in the coming decades.

What is the extent of your presence in Qatar?

Another country where Total is very active in the Middle east is Qatar where we are present all along the Oil & Gas chain from exploration down to LNG production, refining and petrochemicals. We are much willing to further develop our activities in Qatar.

Our Qatar success story is definitely the

development of the North Field with the LNG giant Qatargas. Qatar has reached 77 million tonne of LNG per year production level in 2010. In their view to develop their hydrocarbon resources in a sustainable manner, the Qatari authorities have decided on a moratorium on this field but we are expecting sooner or later this moratorium may end and allow for additional developments.

In the mean time we are working on an exploration block which is operated by CNOOC of China, Block BC and activities are starting on that block this year. We believe the exploration potential in Qatar is still interesting enough.

As mentioned earlier, we have also entered into a new 25 years agreement for the Al Khalij oil field on which we have been the operator since the early nineties. As from January 2014, Qatar Petroleum will hold 60% and we’ll keep 40% retaining operatorship of this challenging field.

What is Total’s plan regarding Yemen in the light of the current security situation in the country?

Yemen is a very important country for Total. We have been present in Yemen for more than 25 years now and we are clearly the only major oil company operating in Yemen today. In 2009, we have started the largest foreign investment ever made in the country, the Yemen LNG plant, with a 40% share. We’re also producing oil from Block 10 which amounts to about a third of the National oil production. We pay a lot of attention to our operations in Yemen and we ensure that security is maintained so that we can continue to operate. The GCC roadmap for the country is ongoing but it’ll take time and Yemen needs support from the international community. We contribute to the country’s economy by maintaining our activities there

In the light of the current political situation, do you see further upstream investment opportunities for Total in the Middle East?

Middle East is clearly a region which has a huge oil & gas potential, probably more than what we know today because until now, non-conventional resources have been MARCH 2013

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country focus TOTAL

under-explored. A lot of wells have been drilled in the region to produce conventional oil & gas reserves but in a way, less effort has been put into exploration. So we believe that the potential in the region is not yet fully identified. We can still see very successful exploration drilling in the Middle East. In the past years, seismic technologies have made tremendous progress and this is partly due to the computing technologies. Another thing is the progress achieved in drilling capabilities which is giving us the possibility to reach very narrow targets in the reservoirs.

How do you assess the impact of the “shale gas revolution” in the US and the fact that some people are saying that the lesser dependency of the US on the Middle East will change the region’s weight on the international oil & gas market?

When you look at it from a global perspective, the competitive advantage that the US is getting from the cheap gas is not without consequences to their economy. But we believe that from a geopolitical standpoint

number of LNG export projects that will get approval in the US and how much that will affect the US supply-demand balance and how much would that effect the world market. Oil is a global market and there is one price, for LNG it is different- there are different markets. Unless you come to a situation where you have enough LNG plants so that a significant share of the worldwide production can be arbitrated between the European, US and Asian market, you’ll find that the price might co-relate. But as long as there is a physical constraint, and not enough infrastructure, you will always get a gap that will be dependent on how much gas can be produced locally and how much can be imported. In the Middle East, Qatar and its LNG flagship Qatargas are very well located to arbitrate between the western and eastern market, which is very good for them.

Do you see a great potential for the development of alternative energies in the region?

I am very optimistic about the work being done in the field of new energies, especially

77 million Tonne

per year production- Qatar’s north oil field of the world, the supply and demand is such, and especially the market is so liquid for oil, that what happens in the Middle East will still be relevant to the global balance. Emerging economies like China or India need oil and this region owns the vast majority of the resources. It is therefore important for the industry and therefore important for Total.

Are the LNG prices factoring in the US “shale gas boom” situation?

The big uncertainty in that respect is the 40

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in the UAE which are very keen on developing these. Total as an energy company, believes that new energies are absolutely necessary in the future and will complement fossile energies in the energy mix. We have moved away from the time when oil companies were hostile to anything except oil. Today, oil producing countries and most international oil & gas companies believe that we need new energies.

At Total, we are working in two different areas. The first one is solar which has a highly

competitive advantage in the region and is a strong business development line for us.

In Abu Dhabi, the Shams project, one of the largest concentrated power plants in the world developed by Total with Masdar and Abengoa will be inaugurated in the next few weeks.

Through our affiliate Sunpower – a world leader in solar Photovoltaic – we are also looking into the new projects that countries in the region are looking forward to develop. Saudi Arabia for instance has made clear that it would like to increase its Photovoltaic electricity generation capacity and we expecting announcements at the end of this year.

In fact, Middle Eastern countries are using a lot of energy such as diesel oil to generate electricity to feed their industry. These are petroleum products that do not generate export revenue, so for them to invest in solar energy is a very good business, as it is free and abundant once you have built efficient installations.

The second aspect in which Total is involved in alternative energies is bio fuels.

We believe that these will complement the liquid fuel market in the future and we are investing in this field. We are looking into developing a credible and profitable activity for renewable energy.

How do you see the relationship between International Oil companies like Total and Middle Eastern National Oil Companies?

Today, IOCs and NOCs are more and more working in partnership. Through times, the relationships between the two have gone through successive phases: a somewhat conflicting relationship at the time of nationalisation, then IOCs worked for NOCs, more as service providers and now we work together as partners. In addition, we have an international exposure, which is valuable for these national companies. This model is excellent as it allows combining our strengths including technical, human and knowledge capabilities, in addition to the profitable combination of the skills of the two. The line of business for us in the region is to see where we can contribute more, mutually and profitably with NOCs.

country focus GRAND PARIS

Be on the right track

“Greater Paris”, is a topic that has been going on for over a century in France.

The first greater Paris project started in 1920. As part of a press trip to Paris, Aparna Shivpuri Arya caught up with Alexandre Missoffe, Director of the Cabinet, Société du Grand Paris to get a better understanding of the project.

I

n 2007, just a few weeks after his election, Nicolas Sarkozy announced his intentions to have a project for the “Greater Paris” as Paris represents 1/3 of the national GDP. He started a special department in the Government “secretariat d’état” for the development of the Paris region. Christian Blanc was in charge of it with a special focus on the economic impact of the “Greater Paris”.

Continuing on that Alexandre said, “The new president Francois Hollande made a public statement and said that

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the project is very important and must go forward, and in our board in Societé de Grand Paris we have got represented from the state and every department in the Paris region, and they all vote for the global skills of the “Greater Paris”.

This project actually started with Sarkozy, but it is now shared with everyone else and has political support.”

Paris has been constructed around fences to protect against invasion and is denser than other global cities in the world. It has two million habitants inside a very small

area with a great transportation system but outside of Paris, the transport system is less efficient with very few public types of equipment. Compared to London and New York, Paris is much smaller.

The Greater Paris territory has: • 12 million inhabitants • 600,000 fellow students (the biggest student metropolis in Europe).

• 553 billion Euros GDP (Number 1 economic region in Europe) • 1/3 of the French GDP • 90,000 people working in the research.

The goal of “Greater Paris” project is to end this cut between Paris and the suburbs, and organise one unified metropolitan district, and to connect the greater Paris to major transport infrastructure.

“We are now in a situation (transport) that carries over one million two thousand people per day, that is an absurd situation, people spend on an average an hour in the transport which is a productivity loss for the economy,” stated Alexandre.

The “Greater Paris” project started by identifying the project territories, sort of clusters all around Paris, some of them are already powerful like Paris Saclay on the south west which is already one of the densest research territory in France.

On being asked if there is an economic rationale for identifying these clusters, Alexandre said, “We have got to give international visibility to this territory to attract new businesses and companies in these areas. Our aim is also to try and organise clusters where people match and researchers can meet scientific and university private investors to try to organise, like all the areas behind the Stanford they came to Silicon Valley because they planned to manage an ecosystem of innovation.”

Alexandre had mentioned earlier that Paris contributes 1/3 French GDP, which got us wondering if the projects will increase this percentage?

He gave an example to explain that it’ll increase, “Hitachi wanted a European plant either in London or Amsterdam, then they

heard about the Greater Paris, so they found it interesting. We are competing with the other big cities; it is Paris, New York, London and a few more.” “ We h a d a l a w i n 2 0 1 0 , w h i c h created Société du Grand Paris (a public establishment). we started the big public debate with the population in September 2010, and the region had a big debate with the national government. the region said that the transport is a local liability so we had two projects (more less the same project). We came to the population that had been expecting investment in transport for the last 40 years. The project region was called Arc express, the state project was called Grand Paris, and the two

time 4% interest was paid and everyone was happy with the placing of their savings with the Paris authority to put the investment in a long period of time.

Alexandre further added that when the metro starts to work, commercial revenues will come through because they rent commercial spaces in the station and there is a usage fee for the operator that will use the lines. Also, they can construct and do real estate project around the station and make money out of it. The balance is to calculate the debts, so that annual revenues will be in a period of 3540 years.

He then highlighted the importance of the Grand Paris project by stating that,

€533 billion GDP of Greater Paris territory

projects merged and are now called Grand Paris Express,” Aleaxandre explained.

Going back to the reason for coming up with this project, Alexandre sais that housing is a major issue in the Paris region.

While there is no dearth of space, but no one will build there since there is no connectivity.

Therefore, if you put together all the hectares together within a rail of 800 meters, you have got 4000 hectares that could change to a small state in the coming years. The idea is to create new attractions for the area around the stations and we move every strategic planning department to empower the population there. That is on the way to answer the housing situation The Paris metro was built very quickly, Paris townhall issued a bond that was paid in 1973, seventy years later. During all that

today it take an hour 26 minutes to go from Issy to another city using 4 different transport system, but tomorrow it will take 27 minutes. For the general economy of the project that is something quite important.

“It will also help create jobs in areas which now are not that well connected.

As of now, we have an absurd situation, people are looking for jobs, and jobs are looking for employees but we have nobody that matches. The project aims to create a large labor market and give access to hundreds of new jobs for new the population,” remarked Alexandre.

The stations of Greater Paris will be real stations like Gare du Nord, Saint Lazare with shops, equipments, and offices and with housing projects above the station, because it has to have a strong identity of the new urban center of this territory. That MARCH 2013

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country focus GRAND PARIS

is also a way for Société du GRAND Paris to finance the public investment in that urban transport.

The idea of a metropolis organised around 8-9 big clusters around is unusual.

Moscow is working in that kind of direction but the Greater Paris has inspired them, and we have a contract with Moscow authority to sell them our experience in this kind of projects.

Moving forth, Alexandre said that there are many projects around the Greater Paris that are linked with the construction of the transport network. “We have investment in international trade center, many projects, new exposition park, one hundred thousand jobs created as a consequence of the Greater Paris project.”

The Greater Paris project is not so much about making an impact but as a way to amplify the movement that already exists.

That is the global renovation project around the Greater Paris network. The construction of the metro helps the construction of new housing project. The project is 100% state owned.

Ta l k i n g a b o u t t h e o r g a n i s a t i o n a l structure, Alexandre said that for each and every of their stations they have steering committees, and once they decide to put the station they meet commercial activity they are going to do and so forth.

He proudly pointed out that their project will be bigger and faster than the existing metro, with one metro passing every 90s.

He further added, “We have 45 thousand passengers coming from the two airports and using our lines every day. There is a project that will allow passengers to travel straight from the airport to Gare du Nord.

We have got special ability, which is new in the French landscape of institutions.

One main mission is to construct a new metro line and another one is to assist the representative of the state in the strategic development of the region to make sure that the transport network, the strategic vision of the economic activity and the housing projects are all linked together.”

When we asked him about the timeline, he said that even though they have a 44

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Alexandre Missoffe, Director of the Cabinet, Société du Grand Paris

caldendar, the government is debating on making a new calendar. The original plan was to have the first opening in 2018 and the complete opening of the network in 2025.

However, according to Alexandre this is going to change – first opening could be around 2018, but the total realisation of the network might be late due to some other projects that might come in the first phase. The decision should be declared in few weeks.

“Every transport line went far beyond the initial expectation in traffic, for example when line A was established i n t h e 1 9 6 0 s , t h ey s a i d t h a t i t w i l l provide transportation for 400 thousand passengers a day by 2020 maximum. The day of its opening it was handling 130% over the maximum capacity. So we want to maintain the capacity because once the line is open we can’t change it anymore, we are building the network for the next 100 years,” is Alexnadre’s rationale.

When we asked him about the challenges they faced and the best practices, he replied, “We have developed our own software for security in the stations that allows us to enter a great number of parameters and from that you can deduct an efficient way for the architects to construct the station in

order to reduce the unsecured parameters, the quality of lights and things that change from a station to another because the stations are in different environments. But I don’t think that is something that could be exported. We also have an innovation done by the Greater Paris Company for this project which is to manage CO2 emissions. The carbon emissions linked to the construction of the projects can be calculated by entering data and information about the status of the ground (sand, stone, depth, the kind of materials you are going to use and more.) This gives you the carbon emissions compared to the different methods of constructions and it gives you the idea of which methods is going to have the less carbon impact, for engineers that is something quite interesting.”

“The financial engineering is very specific to every city, but perhaps the commercial studies we have worked on – which kind of commercial activity will be needed in the station , what are the people’s expectations, what do they want from the stations. We did a lot of studies, trying to figure what people would like to have in the future. This kind of work is common in every country of the world; this could be a source of sharing and inspiration,” Alexandre pointed out.

Ta l k i n g a b o u t t h e j o b - c re a t i o n i n the long term, Alexandre said that the construction of the network will need more or less 15,000 people a year for 10 years.

The positive impact of being a modern metropolis goes from 100,000 to 600,000 in revenue.

They are already seeing an increase in investment due to anticipation but for the moment this is not important because the station will open in 2018. So 3 – 4 years before the opening, big investments will be coming.

On this note, Alexandre finished his very detailed presentation which highlighted the work being done by France to attract investment. This also serves as a best practice model for a lot of countries in the Middle East.

country focus FRANCE

Make the right investment CDC Enterprises was set up to develop and support SMEs and industrial services, based on a stable and long term strategy. Aparna Shivpuri Arya met Philippe Braidy, President, CDC Entreprises, to get to know the details about their work and mission.

P

hilippe started the conversation by giving us a brief overview of the plans of the organisation.

“We are building a new bank – Public Investment Bank. It is a merger between FSI (Strategic Fund for Investment) and OSEO which is a bank that provides loans for SMEs. It is a new organisation that has been discussed between shareholders, but that’s not definite yet.”

“For all investments in the Middle East region CDC is a direct partner. Our company is a management company which has no assets; we invest in banks, insurance companies, industry and more. We are a small society, now we have around 200 people –130 employees in France and others in our two subsidiaries,” Philippe added.

Going back to the roots, Philippe said, “Historically, we started investing in France and not directly in SMEs. Progressively, we have started investing in companies, especially during the crisis in 2008. When FSI was created a lot of money was transferred to us in order to invest in SMEs, but directly.”

He further added, “We experienced good growth.

When I arrived two years ago we had only 70 employees and now we have 130, which mean that we have approximately doubled the number of employees who should support investments in SMEs. SMEs now need investment in equity.”

Continuing on that note he said that their job is to invest in equity and in SMEs. FSI also invests in big companies. They also invest in SMEs in the region and in innovation (early stage investment in companies which have new processes and which are startups).

When we asked about their modus operandi, Philippe remarked, “We do not invest directly in R&D

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– we are not financing research, but we are investing in startups. For example, we are a limited investor partner in INOBIO– 37% stake in this fund which is in the field of biotechnology. Biotechnology is a key area, and there are no short-term results, but we are very much interested in these new products/innovation.

We don’t invest directly in labs, but we have been very successful.”

CDC doesn’t look for funds directly, but through partnerships with major businesses – they look directly for other investors. Philippe is presiding over a special committee for infrastructure. So, CDC talks to sovereign funds to adopt global strategy approach. If that fund has some investments in SMEs, they contact them in that case.

So which sectors are identified for long-term investment and what is the period for long-term investment? To this, Philippe went back into history and said that the aim in the 90s was to invest in funds and the idea was to help startups to structure offers. It was like a Silicon Valley approach.

“We are partners in 250 funds – 1/3 in innovation/ early stage companies; 1/3 for capital development growth; and 1/3 are sectorial investments, like INOBIO in biotechnology. Recently, we have invested in AEROFLON which is in the field of aeronautics.

We also have funds for investment in the food sector, environmental technology, and so on. So, we have some funds and some teams which are specialised,” remarked Philippe.

Therefore, they have industry focused funds and general funds and venture funds. They don’t invest directly in ventures – for that they have partners/ groups which manage ventures for them.

“We invest about EUR 400 million per year and our ambition is to increase it to 600. We have a programme approved by the government for the following eight years – EUR 5 billion. That is public money which is coming from FSI and the government. The government calls it “big loan”, because the French government in 2012 has decided to launch a EUR 3 billion loan for investments in the future. We have been allowed a part of this money, EUR 1 billion, for investing in SMEs,” he replied when we asked for more details about the investments.

“We are working with private investors, we try to invest more money together – our

infrastructure/ in major companies and not necessarily SMEs,” he added.

Philippe also said that it depends on the outcomes the businesses are looking for.

They may be looking for companies which would serve as entrance points for different projects, maybe for partnerships in various technological areas. So, it goes on case by case basis.

Their role is that of a management company, so if you have an SME with projects they could be involved in management of funds.

Soon they will have a merger with FSI and OSEO. Because of this merger, they will have the entire range – from loans to investors’ equity –

€400 million investment per annum by CDC leverage is that we invest EUR 1 and collect EUR 3 from the private sector. The aim of our group is to mix public and private investment in order to have massive impact on the economy.

Where are the investors from?

Philippe said that it is very difficult to say because part of this money is coming from banks and insurance companies which collect money themselves from various investors. He also was unable to comment on how much investment in coming from the Gulf region.

He however did say that they are working with the Gulf countries because they are interested in investing with them. “We are also working with China. Recently, we have created a fund with China (50%-50%). It’s a fund which tries to invest in boats in China and France. We are trying to make a win-win strategy to help French companies to invest/develop in China and vice versa, Philippe remarked.

“We are also working to create a partnership in Qatar. It’s not totally discussed yet. There are also discussions under way with other countries of the Gulf region and also in South America (for example, in Brazil). Our initiatives depend on the aims and ambitions of their partners – so, it varies. For example, we have different sectors and funds; we invest in

they will cover the whole scope. This merger will have 800 staff which will cover the whole French region since they know very well the French companies and businesses. That is very important because they are knowledgeable and can add value to the projects.

We asked him about how difficult is to think long-term in the current environment. To this he said, it is a little difficult since they work with banks and insurance companies they have constraints, they need to manage risk and be cautious. The EU has funds for ten years – five years investment period, and the following five years for divestment. That’s because the financial partners want to get added value.

Philippe also pointed out that it is very important to follow up, because if you have the partner who wants to divest then new investors can come in and provide new momentum. It’s hard to have long term vision with the funds, but because they have this global approach they can support businesses.

There are different factors, like capital risk.

“We try to be sure that the funds we work with have enough money to invest long term.

We also invest directly and then we don’t have the same approach, because we try to stay as long as the company needs. Once the company has developed/reached the size which was

Philippe Braidy, President, CDC Entreprises

aimed, then we exit. That’s why we have a range of tools which enables them to help these businesses not only with investments but with other services as well.”

When we asked him if other countries can follow this model, Philippe was quick to point out that it’s very similar to American SBA because they feed into these funds and the private companies actually manage these funds.

There are similar structures in other European countries, but in France the size is much bigger. Another difference is that in France their staff is placed throughout the country.

Because they are investing in businesses similar to private investors, they can choose the sectors in which they want to invest and that is a guarantee that they will invest in businesses which have potential for growth. They compel themselves to be minority shareholders/in the funds as well. That’s why they are obliged to look for private partners. It’s done by CDC for sovereign funds.

Because of the context – economic crisis – their regulators are becoming stricter, like Basel III. This also creates an opportunity to look for foreign investors. This is a whole new area for them, because if you want to attract foreign investments you have to invest in foreign countries as well.

With this we came to the end of our interesting chat. CDC is an extremely important component of France’s endeavour to encourage business and investment and offers foreign businesses an interesting opportunity.

MARCH 2013

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country focus VINCI

Taking technology to the next level!

As part of the press trip, we caught up with Alain Bonnot, Chairman of Vinci Construction – Grand Project, to know about their operations in the Middle East.

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e started the discussion by asking Alain about the kind of work they are doing in the Middle East and what strategy do they have for the region.

To this Alain said, “Vinci is a ten years old company but it comes from many old French companies that are originally more than 100 years old. All those companies were well known especially in the Middle East like: SGE, GTM, Chantier Moderne and more, and all these companies have been consolidated into one company - Vinci.”

The reason for consolidating was that everybody thought, that 10 – 15 years ago they had many groups in France and the main reason was not the foreign market, but the internal market and it was necessary to combine these companies. In the construction sector, 48

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the external market has been the same.

“We are the most important group in the world in terms of construction, two Chinese companies are bigger than us but they are state- home companies. We are the biggest private group in the world in terms of construction, but it doesn’t mean that we are very big and that we can take everything we want. In the past we have worked a lot in the Middle East especially in Saudi Arabia, Today, we think that Middle East is very important for us but we can’t go too fast. Five years ago, we had an opportunity so we decided to try to work in Qatar. About ten years ago we had made LNG tanks and one man from our company had and made good links with Qatar. His name is Serge Mollen and 5 years ago Serge signed a shareholders

agreement with the state Qatari, with Qatari Diar,” remarked Alain.

And they decided together to launch a company QDVC. This company was made for the huge projects of Qatar. The sharing of the activities was very clear, VCGP had to operate and QD had to bring the projects.

“We have got a lot of nice projects, the timing was good and we are finishing today some projects and we are continuing with some others. We have started in a special type of contract which is ECI- early contract involvement. in Qatar, we have started the LRT four light rail operation lines, the light rail tramway network transportation of Lusail. We have finished the studies, and the tunnels. We are finishing the stations and waiting for the contracts of own trail finishing. With Qatari Diar we are mainly the

country focus VINCI

Alain Bonnot, Chairman of Vinci Construction

only one in the power supply and it’s a very big side.”

“Therefore it is possible to launch a company in very few years and with good success, I think we have very good relationships with Qatari Diar and the Qatar state,” opined Alain.

With the FIFA World Cup, is there greater pressure to expedite projects?To this Alain said, “I don’t know any company in the world that is not under pressure. We are under pressure. I think that Qatar is a good client.

We have a good relationship with Qatar and we hope to stay involved and progress our activities there. We hope to participate in the new project of Doha Metro which is very big and after that there are other projects especially one which is very interesting for us. Doha bay crossing, which is a big bridge to cross the bay of Doha. We have also made studies for the next bridge between Qatar and Bahrain (40 km). All our studies are done, we have made it with COEHE, but we have time to do this before 2022 and if it has to start one day we will be ready.”

“We are preparing this company to succeed.

Our last project is going to initiate what we haven’t done before - a flow business. We want Qatari people to progress in smaller contracts.

I would say that perhaps today we focus on this market but we don’t want to be reduced to this market and are also interested in Oman.

We have history in Oman have built a dam.

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We hope to keep going on with Oman with different contracts for dam constructions,” according to Alain.

Highlighting Saudi Arabia, he said, “I want to speak about Saudi Arabia; we know that Saudi will be in the next years the most important market of the region. I was in Riyadh few days ago and we know that this market will increase a lot, but we don’t want to go too fast. There is a huge plant for the metro, we are in one consortium, but it is very big and if we were awarded we would take just a small part.”

“We want to remain prudent in Saudi Arabia but our target is to develop a real presence in this country, because it is growing a lot. When we are in a new country, the most important thing is that we want to settle in it, to train, to live here, to hire native people, to create what we have created in many places in France – we want to become a company of the country. The governments of these countries, expect from us to transfer the “know how”, and the best way for transferring the “know how” is that they give us a contract and we commit to take native people and train them to participate to the universities and training programmes, and to be able to show that all the sides put this in act, “remarked Alain.

When we asked him about their competitive advantage, Alain said, “Our technology is recognised all over the world, but when we work in a country we know the good way to hire workforce, the good way to buy iron, the good way to everything. Once you do all that, and put your design, you become very competitive. And this will hold true for other contracts in the future.”

Talking about the cost of doing business in the Middle East, Alain was quick to point out that In Vinci, they don’t go to the Middle East or elsewhere to lose money, but to earn money, and if they can’t then they leave.

“Our specialty is complex projects (big bridges, big tunnels, big parking) and our work is to simplify what is complex. We have to choose the world that we want to build, and that is the case in Qatar – it has been possible for us to do what we wanted with our shareholders. I think this is a reason of success, but every day is different and

we could fail tomorrow. We have to be very professional and we have to choose our targets with the respect of our people, staff, and our local people. First aim is safety, when you organise a site around the safety, you organise it well, and we don’t want to face failure in terms of safety,” were Alain words of wisdom.

“Secondly it is also very important’ to respect the environment, the client, even if one is in the most difficult negotiations and discussions. At the end sustainable development is important.

What we want is to settle in the country and remain in the country not because we go to the client but because the client comes to us. That is what we are trying to do, and sometimes it works,” Alain said.

Talking about their modus operandi, Alain said that they go in for joint ventures sometimes.

“A local company is completely invested in the country and the government will never kill a local company, but when we are in front of the government, it will not hesitate and when we are in default, we might be finished. However, the government will save the local company. That’s why, it is absolutely necessary in Qatar to work with great local companies and in the Middle East we work with all the great companies,” opined Alain.

Lastly, talking about their strategy, Alain said that a good strategy is not to go to the client, but to let the client call them. “On the simple sites, there will be nothing we can do; we will always be more expensive than the Turkish / Chinese companies. But when it is complex, when designers draw something and we are able to draw something different less expensive, then we are very interested and we go for it.”

What makes this market very special is that they have plenty of money. The issue is not the money, the issue is a good engineering and our strategy is to bring that in and then anything is possible.

“We don’t want to go everywhere. We want to develop relations – like Qatar, Oman and KSA. Today we are not in Kuwait and UAE, but if there are opportunities, we will explore.”

With a very clear focus and a niche, it is no surprise that Vinci leads the pack.