Iran: Untapped foreign investment opportunity

Iran Materials 1 June 2009 11:40 (UTC +04:00)

TEHRAN (MEHR - Trend )

A seminar entitled Foreign Investment in Iran was held at the Raizan Exhibition Center in Tehran yesterday. The Organization of Investment and Technical Assistance of Iran (OITAI) invited 120 companies from 15 countries to the seminar in order to facilitate foreign investment in Iran and familiarize potential investors with Iranian rules and regulations.

The opening presenters of the seminar were Foreign Minister Manuchehr Mottaki, Roads and Transportation Minister Hamid Behbahani, Housing and Urban Development Minister Mohammed Saeedikia, Central Bank of Iran Governor Mahmoud Bahmani, and Economic Affairs and Finance Minister Seyyed Shamsuddin Hosseini.

In his presentation, Mr. Mottaki pointed out that Iran's economy has opened doors for foreign investment over the past few years by removing obstacles and easing restrictions as well as promoting the expansion of the private sector.

Mr. Mottaki encouraged the foreign investors to take advantage of this situation and not miss this opportunity.

In his presentation, Mr. Hosseini pointed out that developing countries absorbed almost a third of all global foreign investment in 2007, to the tune of $600 billion, which was a 25 percent rise compared to 2006.

Mr. Hosseini pointed out that, despite the current global financial crisis, developing nations experienced a seven percent growth in foreign investment in 2008 while developed nations faced a 15 percent decline last year.

"Iran has managed to maintain economic growth and stability because it was less interdependent on global capital and stock exchange markets of developed countries which faced an 80 percent depreciation," Mr. Hosseini added.

Mr. Hosseini said that last year Iran experienced an economic growth rate of 6.5 percent. "The Tehran Stock Exchange experienced 13 percent growth last year while growth rates were close to zero for its U.S. and European counterparts," he noted.

He said that the Ministry of Economic Affairs and Finance has recently formed a working group which has executive and judiciary powers in order to identify the bottlenecks and obstacles in the way of economic activities and facilitate private sector business by easing restrictions.

Other presentations

During the seminar, each speaker was introduced by Mr. Behrouz Alishiri, the managing director of OITAI.

Bank Saderat Managing Director Hamid Borghani informed potential investors and the seminar participants that the Bank Saderat will be privatized on June 8. With 3,900 automated teller machine (ATM) units, he said that Bank Saderat is an international bank with 21 branches outside the country.

Before introducing the next speaker, Mr. Alishiri said, "Article 44 (of the Iranian Constitution) was designed with the main goal of privatization in mind, especially of the telecommunication and banking sectors."

In his presentation, Chairman of the Security and Exchange Organization (SEO) Ali Salahabadi pointed out that Iran passed a new capital investment law three years ago, according to which manipulators of the capital market can be punished in a court of law. The Jurisprudence Committee of the SEO is compatible with sharia (Islamic law), he noted.

He added that the market capitalization of the Tehran Stock Exchange (TSE) is $53 billion in 37 sectors, but said there are some limitations in foreign investment. For example, initial investment can be remitted only after three years but the dividends can be sent back to the investor's home country every year, he explained.

In his remarks, Deputy Oil Minister Akbar Torkan gave a short overview of the Fourth Five-Year Development Plan (2005-2010) and pointed that in the oil and gas sectors only downstream industries like refineries can be privatized.

"We're looking for investors to privatize up to 80 percent of the refinery sector," Mr. Torkan said.

Outlining plans to privatize refineries in Tabriz, Isfahan, Shiraz, Arak, and Hormuz, he said their shares will be offered on various stock exchanges in the country.

Another downstream project looking for investors is the transit pipeline from the Caspian Sea to the Oman Sea. Among the projects where privatization has been implemented, Mr. Torkan said 80 percent of the shares Pars LNG and Iran LNG are owned by private sector partners.

He added that Iran has plans to export gas to Europe and South Asia.

The Iran-Pakistan-India pipeline project is looking for alternatives due to lack of interest from India, he said. "So we are looking at re-routing the pipeline from Pakistan to China."

Mr. Torkan said that the Oil Ministry is looking at the possibility of exporting gas to the United Arab Emirates, Kuwait, Bahrain, and Syria. "Iran will be a transit point for gas exports from Turkmenistan to Syria."

The next speaker at the seminar, a member of the Turkish Chamber of Commerce, said, "The reason for the close ties between the two countries is that Turkey is the gateway to the West for Iran, while Iran is Turkey's gateway to the East."

He added that bilateral trade between the two countries grew from $1.2 billion in 2001 to $10 billion in 2008.

The Turkish official described Iran's bureaucratic process as an obstacle for trade which can be corrected by revising customs duties and improving transportation via bilateral meetings.

Mr. Mehdi Ghazanfari, Irna's deputy minister of commerce and director of the Trade Promotion Organization of Iran (TPOI), was the last presenter in the seminar, but his speech was the most creative and innovative.

"My organization is in charge of what happens before and after the wedding,"

Mr. Ghazanfari stated while describing the TPOI's responsibility in laying out rules and regulations on trade.

"The good news is that Iran's 70 million people are some of the world's greatest consumers. With an economy of $160 billion, Iran's imports stood at $60 billion last year," he added.

Over the past few years, "we've made regulations easier. While we're not a member of the World Trade Organization, we enforce all WTO regulations," he pointed out.

Describing the UAE, China, and Germany as Iran's three leading trading partners, he said that Iran's imports and exports have managed to grow during the current global financial crisis.

In his concluding remarks, Mr. Ghazanfari informed the audience about the potential of Iran's free trade zones and special economic zones, "where you pay no tariff or tax for 30 years."

On the days following the seminar, the OIETAI has plans to take the potential foreign investors to different sites. For example, plans to take investors interested in the petrochemical sector, such as the Hinduja Group that was represented by Mr. M. Chabria, to Assaluyeh, Iran's gas hub.

Among the exhibitors looking for potential investors at the seminar were the Mapna Oil and Gas Group, the Tehran Metro Station Complexes Development Co., and some other domestic firms.

Also present at the seminar was Oleg V. Akulinichev, the general director of the Russian-Iranian Business Council. Mr. Akulinichev told the Tehran Times, "RIBC looks after Russian businesses that have a special interest in Iran in various sectors, such as banking, oil and gas, automotive, etc."

Describing the presentations by various Iranian speakers as meaningful, Mr. Akulinichev said, "We believe in Iran's moral and intellectual potential."

Commenting on the impact of the sanctions on Iran, he asked, "How come, over the past few years, foreign investment and Iran's trade transactions with other countries, like China or South Korea, has managed to grow?"

Report by Salman Ansari Javid & Mehdi Nowruzvandiyan