French arms firms say hurt by foreign bribes

July 11th, 2007  

Topic: French arms firms say hurt by foreign bribes

French arms firms say hurt by foreign bribes
Tue Jul 10, 2007 2:26 PM BST

By Tim Hepher
PARIS, July 10 (Reuters) - French arms firms complained on Tuesday they are losing valuable export orders to nations which continue to flout an international crackdown on bribery.
Bruised by a series of setbacks, they also rounded on French envoys and politicians for weakening France's 13 billion euro ($17.75 billion) defence industry by failing to do their bit for exports.
"In France the priority is diplomatic success but not exports," said Charles Edelstenne, chief executive of Dassault Aviation <AVMD.PA> which makes the Rafale jet fighter.
"Exports have not been mobilised as a national priority, with each minister wearing the words 'export, export, export' stamped on his forehead," Edelstenne told a news conference, speaking on behalf of the country's CIDEF arms industry lobby.
French defence firms are lobbying for a stronger political push to help them win defence contracts as well as a 40 percent boost in research spending to help gain a technological edge.
They say other countries such as the United States and Germany put politicians on the front line to help win orders.
The demands appear in an industry white paper which kicks off a lobbying campaign ahead of a major review of French defence strategy expected in 2008, followed by a new five-year set of military procurement spending and investment goals.
But the document says that even with improved sales patter from politicians, the industry would still be penalised by a weak dollar and uneven implementation of a 1997 international anti-bribery convention brokered by the Paris-based OECD.
"Such distortions have a direct impact on the ability of French groups to compete in exports," the industry paper said.
It did not name countries but the comment comes directly on the heels of a row over British dealings with Saudi Arabia.
Former British Prime Minister Tony Blair was criticised in December for halting a probe into alleged bribery in a Tornado fighter aircraft deal with Saudi Arabia worth an estimated 43 billion pounds ($86 billion) stretching back to the 1980s.
Blair's decision undermined French efforts to sell the Rafale to Saudi Arabia, according to French newspapers. Britain's BAE Systems Plc <BA.L> now faces an investigation by the U.S. Justice Department.
BAE has denied making wrongful payments in its dealings with Saudi Arabia under the government arms deal, known as al-Yamamah. The UK also has a new agreement, known as al-Salam, to supply Saudi Arabia with 72 Eurofighter Typhoon jets.
France is looking for its first export customer for the multi-role Rafale after losing two high-profile contests to the United States in Asia.
Acknowledging some technical constraints, however, it has said it plans to modify the aircraft's radar and is pitching the plane to countries including Morocco and India.
The French defence lobby said France should boost annual defence research spending to a billion euros from 720 million.
It also urged the government to implement a pledge to maintain military spending at two percent of gross domestic product, including about one percent or 16 billion euros which is spent on equipment procurement and infrastructure.
Despite singling out foreign corruption, France remained haunted on Tuesday by a major bribery scandal of its own over the sale of frigates to Taiwan in 1991, six years before the OECD agreement banning secret commissions came into force.
The deal generated huge payments whose existence has been acknowledged, but without a five-year investigation that ended last October being able to trace the cash or find any culprits.
The frigates affair in turn provoked byzantine political scandals including the Elf affair which consumed reputations and most recently, a 2004 attempt to smear French politicians including just-elected President Nicolas Sarkozy by linking them to fictitious bank accounts tied back to the Taiwan deal.
Former French Prime Minister Dominique de Villepin said on Tuesday judges had called him in for questioning in the smear case and that he could be placed under official investigation.
(Additional reporting by Jean-Michel Belot)

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