Friday, Jul 20, 2018
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Investment in Iran

Iran to “open its diverse market to foreign investors” – Ambassador

3 years ago

D. Mohammad Hassan Fadaifard, Iran’s Ambassador in Spain
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Mr. Mohammad Hassan Fadaifard

Iran’s Ambassador in Spain

With U.N. sanctions on Iran set to be lifted at the end of June as part of the nuclear deal with the country, Iran’s Ambassador in Spain, D. Mohammad Hassan Fadaifard, discusses the steps taken to strengthen Iran’s economy and international relations and how it is working to attract foreign investment.

With the conclusion of the talks in Lausanne, there is worldwide expectation about the coming lifting of the sanctions imposed on Iran, and thus about the many possibilities that would be open to international investors in such a huge and advanced market. In spite of the sanctions that prevent the country accessing many international markets, Iran, the second largest economy in the Middle East (US$ 404bn in 2014) has been registering marked improvement in macroeconomic conditions over the past year, with a rebound in economic activity and a decline in inflation. The IMF predicts growth rates of 1.3% in 2016, and to keep on improving at 2.1% by 2020. Please discuss.

The economic diplomacy of the Islamic Republic of Iran has adopted, to stabilize and strengthen the economy, the approach of the economy of resistance domestically and the constructive interaction approach internationally. The base of the economy of resistance at the domestic level is the transformation of the current economic structures and their reorientation towards domestic production reducing the economy's dependence on oil revenues and thus this frees the country's economy from the sale of crude oil, diversifying the national economy in sectors of domestic consumption and exports. In its international dimension, economic diplomacy is based on factors such as strained foreign relations based on constructive interaction, solving problems through dialogue and diplomatic interaction, and facilitating mechanisms for mutual cooperation of the national economy and the international economy. Internally, the consolidation of the economy facing external crises is based on factors such as supporting domestic production; limiting the state economy; liberalizing the economy through the participation of non-governmental investments; meeting the experts; promoting the use of new technology based on salient features of the Iranians such as intelligence, creativity, the ability to generate jobs and intellectual power in areas such as industry, trade, agriculture and services; and most importantly, reducing the economy's dependence on oil revenues; focusing on selling the oil products instead of selling crude oil and diversifying the sources of income of the country especially by way of taxes. At the same time, other factors are taken into account such as controlling inflation, creating jobs, stabilizing the currency exchange rate,  speculations, corruption and smuggling, and finally, protecting the vulnerable and less affluent. Internationally, the Islamic Republic of Iran seeks to solve problems based on mutually beneficial formulas with friendly dialogues. If this approach is successful, Iran will open its diverse and potential market to foreign investors, so that foreign investment will be fully supported by law. With the experience gained over the years of sanctions, Iran is seeking to diversify its foreign partners and find complementary economies that, far from the impure political trends, are interested in a healthy and mutually beneficial economic interaction. By implementing further reforms in the Law of Attraction and Protection of Foreign Investment and the transformation of the format of national contracts, Iran is sending a message to companies, banks, industries and foreign investors that instead of keeping their capital in banks with negative interest rates, will look at the vast and diverse Iranian market with the greatest potential for generating profits. The great effort of foreign companies to enter the Iranian market, while sanctions have not yet been lifted, demonstrates this reality. Focusing on its potential, the Iranian economy can achieve the goal of becoming the leading economic power of the region.

There are many advantages that make Iran stand out. With the presence of 40 industrial sectors in its stock exchange, Iran has one of the most diversified industries in the Middle East and North Africa. There is a high diversity in mining and hydrocarbon reserves in Iran. Large oil reserves (4th worldwide) and gas (2nd worldwide), nuclear energy and capacity to exploit wind and solar power, have given Iran a unique position. In cutting-edge industries such as the automotive industry, Iran is in a strong position worldwide. Among car maker countries, Iran held the 18th place in 2014. Vehicle production in Iran in 2014 registered an increase of 46.7% compared to 2013 and amounted to one million one hundred thousand units. The growth in vehicle production in Iran in 2014 was the second-highest total in the world. Mining; Iran is in second place worldwide, behind India, in the production of sponge iron and according to the plans made, next year it will be in the first place worldwide in the production of sponge iron. Iran is today the largest electricity producer in the Middle East and it exports it to neighboring countries such as Turkey and Iraq. Iran is the largest steel producer in the Middle East and one of the producers of steel in the world using the direct reduction method. The largest producer of ceramics, lead and zinc in the Middle East; third in the exploitation of decorative stones; 4th zinc producer; 9th cement producer; the 17th steel producer; 10th cobalt producer; and being one of the advanced producers of leather, aluminum, manganese and copper in the world, are other key economic aspects of Iran. From the point of view of the variety of agricultural products, Iran is in 4th place in the world. Another advantage of being present in the market of 80 million people of Iran is its access to the market of 350 million people around it, to which it has easy access through ports, rails and roads. In order to increase its contribution to international trade, Iran seriously seeks the creation of suitable, transparent and secure conditions for foreign investors through the provision of legal support, reducing government intervention in the affairs, reducing expenditures for exchanges, and other facilities such as the right of ownership, promoting an effective competition environment, investment facilitation, lifting obstacles for investments and stopping the discrimination between the state sector and the non-governmental sector. Iran plans to increase its relations in the coming years, with international bodies, particularly with the World Customs Organization, as well as increasing regional cooperation and subscribing to important Customs Conventions. These actions will contribute to the improvement of Iran's position in the world rankings and they will make the good economic situation of the country known to foreign investors and reduce the risks of investment in the country.

Striving for a remarkable and steady economic growth, efficient development, an economy based on science, expanding welfare among the population, reducing poverty, achieving full employment and increasing income per capita are among the main areas of Iran's 20-Year Economic Perspective. According to this 20-year plan, the priorities of the country's economic policies were established in the reform of the customs system, the banking and insurance system, the tax system, capital markets, structural reforms, improving the work and business environment, fight against corruption, financial and administrative discipline, privatization, objective removal of subsidies, the promotion of the infrastructure of society, e-economy and attracting foreign investment.

In terms of foreign investment, Iran has one of the most open regimes in the region, and in recent days many international delegations are visiting the country. What can international investors find in Iran once the sanctions are lifted?

What could be the implications for the country, the region and the world after the full re-engagement of Iran in the world economy?

Iran's active participation in economic equations of the world will result in a good space to present its high economic potential and it will create the opportunity to take advantage of the structure of safe commercial and industrial cooperation with the most stable Middle East country for foreign companies. The domestic and foreign economic sectors will get the greatest benefit from a better climate in international interactions. The concerns of foreign companies to enter Iran's beneficial projects will disappear, as they will enjoy the beneficial trade with Iran as well as technical and technological cooperation in all areas such as insurance, banking and transport without the threat of a third country. The market of 78 million people in Iran, given its high investment potential due to its natural and human resources, cheap energy and geographic location, can show foreign companies the need to look at Iran as the economic hub of the region. The Iranian market has been beyond the reach of Western companies in recent years and has become an economy aligned to the east, mostly used by Chinese and Indian companies that have been able to keep parts of Europe and the USA, sharply increasing their stake in the Iranian market through the initiatives taken. The lifting of existing trade barriers will open the doors of Iran to Western companies in view of the high potential in areas such as investment, exports, imports, etc.

If foreign investors want to invest in the Middle East, they will not find a safer and more stable country than Iran from the economic, political and social point of view. The situation and the possibilities of Iran are such that foreign partners can work easily with Iranian companies on joint projects of capital and human resources and conquer the markets of the region. With 6 free zones and 19 special economic zones with attractive advantages for investment, Iran has suitable conditions for entrepreneurs and investors. As regards security of economic activities, the country has passed different laws in recent years to protect foreign investment. For example, the tax law, abundant tax exemptions for productive activities or the Law on the Promotion and Protection of Foreign Investment have given the necessary guarantees to foreign investors against any non-commercial risk and they ensure total freedom to get the capital out of the country and the benefits accruing. Petrochemical, automotive and banking are some areas that may be of interest to foreign companies, upon completion of negotiations (nuclear) getting positive results. Iran has a huge amount of certified reserves of oil, natural gas and various minerals. The development of infrastructure is one of the priorities of the Iranian government and a good opportunity for international investors. In fact the world's oil giants have already come to the Iranian market and there are ongoing negotiations on various projects to be undertaken. In view of its low risk and high return, Iran's petrochemical industry is very suitable for foreign investment. Iran has completely changed the previous "repurchase agreements" and has offered incentives and legal guarantees for foreign investors to enjoy the guaranteed benefits. Logically the lifting of all economic sanctions and the facilitation of monetary, financial, credit and insurance exchanges will improve the climate for the presence of foreign investors in Iran. We hope that after the implementation of the Joint Action Plan, all sanctions approved by the Security Council of the UN as well as economic and financial sanctions approved by the EU or US will be lifted soon. The possibility of joint ventures to get into the infrastructure projects in Iran or in neighboring countries (industry, mining, communications infrastructure, etc.) will be one of the ways of more active participation of foreign companies in Iran.

The geographical proximity to a market of 350 million people in the neighboring countries of Iran (Central Asia, Caucasus and Afghanistan area), the profitability and the existence of infrastructure such as ports, roads and rails and especially the existence of commercial, cultural and social ties with the people of the region, Iran has become the best in communication in the region. Current actions indicate a national will to activate the necessary traffic infrastructure that will contribute to the dynamism of the North South Corridor. This corridor will reduce the time and expense for transporting goods from Southeast Asia to Europe by 30% and 40% respectively. For this purpose, Iran will use the potential of the ECO Organization and the Shanghai Cooperation Organization.

Compared to other countries in the region, Iranians have strived to support the development of a remarkably diversified economy. Aside of being home of some of the world’s largest hydrocarbons reserves, the country also has an impressive record of manufacturing activity, a very dynamic agribusiness base with strong advantages in certain crops and produces and one of the most appealing touristic  offers in the region.

Among the various projects there are dozens of exploration blocks with chances of success of more than 70% that set a great horizon for this global industry. In the development of oil fields in western Iran, for example in Azadegan, Yadavaran, Darkhoeen, Yaran and some other fields, we can increase the production capacity of Iran's oil by one million barrels a day. The Iranian Oil Ministry has planned in the framework of a plan for four years, an increase in production of 700 thousand barrels per day in these fields. Increased recycling of oil, particularly in exploitation fields, is another priority of the Ministry of Oil that can be of great interest for cooperation with leading oil companies. The Ahvaz Asmari, Maroon Asmari, Bibi Hakimeh, Gachsaran, Aghajari, Rag Sefid, Mansoori Asmari, Pazanan, Karanj, Parsi and Shadegan fields are examples for this activity. Today our neighbors, especially in the Persian Gulf, need gas for their development projects. Currently some of these countries import liquefied natural gas while with the installation of pipelines they could meet all the needs and expand energy cooperation to other political, economic and trade sectors. Iran has expressed, similarly, its willingness to supply a part of the gas Europe needs using pipelines or tankers. Foreign investors are the tools for the realization of this project.

In parallel with investments and development of the oil and gas industry, our government has been focused on other sources of income to reduce the dependence on crude oil exports. For this purpose, we need to further develop the country's infrastructure to optimize revenues and their diversification especially in areas such as tourism. Obviously the power and capacity of the reserves and production of energy in Iran are helpful to other sectors in the medium term. However Iran is one of the richest countries in the region and has large reserves of oil and gas. Iran has one of the largest gas productions in the Caspian Sea and the Persian Gulf. It is a big market for the West which has so far been closed. Yet this situation created an opportunity to further develop this area and other economic areas.

At present most of the gas from Iran is exported to Central Asia and Turkey. In the future, Europe will also be able to import the gas it needs from Iran. We believe that the infrastructure and the transport of energy of Spain as well as the roads in Eastern Europe have set good conditions for the export of Iranian gas to the continent. Asia may also be another customer of Iranian gas by pipeline. In 2014, Iran has had a daily production of 3.6 million barrels of oil. The target for 2018 is a daily production of 5.7 million barrels. The lifting of current sanctions may clear the way for the return of European oil companies to Iran's energy market and in fact these companies have already shown a high interest for this purpose. Since a month ago, dozens of delegations from Western companies have traveled to Tehran to study their return to this attractive market. So these days we are seeing a competition between Western companies to get the best chance to start trading with Iran. In addition to the above mentioned sectors, Iran exports a significant amount of electricity to neighboring countries. Turkey as one of the main importers of Iranian gas may be one of the routes of gas export to Europe. Seeking cooperation with international oil companies and their participation in the process of exploration and development of the fields, especially in recycling projects in the country's largest oil fields and the development of this cooperation in all land and sea areas including technical, financial and administrative cooperation are other plans of the Iranian government. The transfer of modern technologies to the sector of exploration and production in the oil and gas industry of the country and the increase in internal capabilities with the goal of independent or joint participation of Iranian companies in international markets is another of the country's strategies. The high potential of oil and gas from Iran and its geological structures have turned the country into a place suitable for oil investments in such a way that the amount of negative risk and the costs are very low for the companies, incomparable with other countries. With the lifting of the last barriers it can be said that everything is ready for the start of a new era of cooperation between this Iranian industry and the large and prestigious international companies.

The mini projects for liquefied natural gas (mini LNG) or the various petrochemical projects called GTPP (gas conversion to propylene) and the comprehensive plan of the refinery complex of 480 thousand barrels of Siraf are some examples in this area. The field "South Pars" is the largest independent gas field in the world. At present there are 10 phases in operation in this field and they are planning to develop 17 other conventional phases with a capacity exceeding 450 million cubic meters per day of natural gas and 700 thousand barrels per day of natural-gas condensate. This gas production capacity will be able to, along with other projects, completely change the situation in this sector in the region and the world. The implementation of projects connected to this, including the installation of liquefied natural gas units in order to export to countries outside the region is another potential for investment in parallel with the projects from this field. They are planning LNG projects for export to more distant markets, which leads to the possibility of investments and shares of international companies. Similarly there are extensive plans for the renovation of existing refineries and for building new ones. A comprehensive program for the development of new petrochemical units that require an investment of 75 billion dollars over a period of eight years has been designed. Such investment would increase the current Iranian petrochemical production (20 billion per year) to 70 billion dollars annually. This major investment will provide many opportunities for investors, traders and engineers inside and outside Iran.

The agricultural sector contributes an 11% to the country’s GDP and employs over 23% of the active workforce. In a country of 77 million with impressive productivity in certain products, what are the top strengths of the sector? How can foreign investment contribute to improve the performance of these industries?

Agricultural production in Iran amounts to over 90 million tons per year. Iran is among the top 10 countries worldwide in the production and export of agricultural products especially in garden products. In this sense, Iran is the world's largest producer of saffron, pomegranate and pistachio; the second largest producer of dates and apricots; the third largest producer of figs and cherries; and the fourth largest producer of nuts and apples. In the production of 22 major agricultural products, Iran is on the list of the first 7 countries. In wheat it is the 18th producer worldwide. It is the fourth largest producer of apples, quinces, nuts and acacia gum. FAO statistics indicate that Iran is the fifth largest producer of silkworms; sixth largest producer of peaches, onions and lemons; and the seventh largest producer of tomatoes, oranges, kiwis, hazelnuts, plums and mint. Given the size of the country and its suitable climate, some infrastructure is necessary to increase agricultural production and companies operating in the area of agribusiness will enjoy government incentives.

There is an excellent possibility of cooperation for participation, both for investment and to provide technology, of foreign companies in the production, packaging and marketing of agricultural products of Iran in world markets. There are large areas for mutually beneficial cooperation in water management and development of fisheries. 1700 kilometers of water border of Iran in the Persian Gulf and the Oman Sea and access to the Indian Ocean, have created a unique opportunity for the participation of foreign companies in these projects.

Strengthening cooperation with other countries and increasing partnerships and relationships play an important role in improving the image of Iran and its products. Showing the realities of the attractive market of Iran as well as its stability and economic security also has an effective role in this regard.

Many countries around the world especially in Europe and Asia make up the export market for agricultural products from Iran. Among them we can name the following: Russia, Germany; Austria, Spain, Estonia, Scotland, England, Belgium, Bosnia, Hungary, Switzerland, France, Sweden, Italy, the Netherlands, Jordan, Kuwait, Iraq, Saudi Arabia, Oman, Qatar, UAE, Bahrain, Turkey, Azerbaijan, Afghanistan, Australia, Taiwan, China, Singapore, Philippines, Vietnam, Hong Kong, Nepal, Malaysia, India, Japan, Sri Lanka, Canada and Mauritius.

Iran sits on a soil that is filled with history: for millennia, different civilizations have passed through the country’s territory, leaving behind a trace of art and heritage. How has this tradition survived to nowadays Iran? What can a visitor experience in the country?

In terms of foreign investment, how can it contribute to the consolidation of t5he sector and achieve the target of 20 million visitors by 2025, as set in the 20-year Economic Perspective?

Iran has an area of 1,648,000 square kilometers, a four-season climate and an ancient civilization which has made every corner of the country have something to say. According to information from the World Tourism Organization, Iran is the 10th country which is attractive and with a high capacity in the tourism industry and it is the 5th country in ecotourism. In addition to the monument of Persepolis, the remains of the Achaemenid Empire and the tomb of the Shah of that Dynasty (Pasargadae) and other archaic buildings and monuments, Iran is interesting for tourists for its cultural aspects and famous poets such as Hafez of Shiraz and Saadi. In addition to the pre-Islamic era monuments that are in the current southern province of Fars, other cities like Isfahan, Tabriz, Mashhad and Hamedan house Islamic monuments. Many of the monuments of Isfahan such as the Naqshe Jahan square and the city's mosques are registered in the list of world heritage by Unesco. Yazd, anothe of Iran's ancient cities with 700 acres of history, offers attractions of Kavir desert in central Iran. Central Kavirs in Iran (as Lut, Maranjab and Shahdad) are intact and receive many tourists from around the world. The Caspian Sea, the Persian Gulf and the Oman Sea are other tourist attractions in the country. Kish Island like a pearl located in the Persian Gulf is one of the best tourist water attractions of the country. Visiting the marine aquariums on this island and flying over the Persian Gulf is something many foreign tourists wish; of course, they can visit the island without needing a visa. In the Oman Sea there is an island from where you can see the attraction of the ocean: the island of Hormuz with all its red earth and the transparent water is of great interest to tourists. In addition, Iran receives many religious tourists and is the destination of many Muslims who wish to visit religious sites. In recent years there has been an increase in ecotourism and health tourism in Iran.

One of the characteristics of Iran, important from the touristic point of view, is the existence of high mountains, valleys, plains, kavirs, rivers and lakes that allow the possibility to enjoy all four seasons simultaneously in different parts of the country, so that in winter you can enjoy water sports in the sea in the south of the country; you can ski in the mountains in the west and northwest of the country; while enjoying a spring weather in the coastal cities of the Caspian Sea. Between the Caspian Sea and the Alborz mountain range there is an attractive riverside full of beautiful forests. The Persian Gulf coasts have rocks, sand and wetlands in its different parts, they are not as homogeneous as the coasts in the north. The southern provinces, particularly Khuzestan, which are part of the Mesopotamia, are flat and with a minimum height of sea level. If a tourist strolls through the mountains of northern or western Iran, they will find wonderful towns, villages and gardens that will cause amazement. Another feature of the Iranian territory is the remarkable height of the plateau of Iran from the sea level, so most of the Iranian land is situated on a height of more than 1000 meters above sea level. The great mountain ranges of Alborz from the north, the Zagros Mountains in the west and mountains ranging from Khorasan to Baluchistan have surrounded the country.

The presence of tourists in a country with 7000 years of civilization is an unforgettable experience. Iran is the origin of some of the oldest civilizations in the world. The amount of archaic monuments of the country registered with UNESCO reaches 17 cases placing the country in the 9th position globally. The existence of religious and ethnic diversity is one of the potentials of the country. When traveling to Iran, foreign tourists see the aspects of the ancient Iranian civilization and the tourist, commercial, religious, educational, medical and sports attractions, and they also meet a diverse society in terms of religion, culture, ethnicity with their own religious and administrative structures. According to international reports, it is expected that the country's tourism sector will experience an annual growth of 5% until 2020, a growth that will surely be higher compared to other economic sectors. Although the country has one of the greatest tourist resources in the world, it has been unable to get its deserved position in this sector due to regional matters and the contamination of the behavior of countries for political reasons. In a normal situation and in view of its tourist potential, Iran should be among the top 10 destinations for foreign tourists worldwide. With the development of its tourism industry, Iran is seeking, like other countries, to generate income and employment, to diversify the economy and to contribute to the privatization but at the same time it seeks to promote open dialogues between people, intellectual exchanges, the objective presentation customs, traditions, cultures, ethics and the peaceful spirit of the Iranians as well as the pacific coexistence among different ethnic groups in the country. In few countries in the world that can be seen, based on cultural and religious instructions, the tourist is treated as a guest. Many foreign tourists who have visited Iran admire Iran for its hospitality and they consider them people with their own culture, arts, literature and ethics. For a country that has been, for almost four decades, the subject of a hostile campaign, it is more valuable to send this cultural message than to draw income. Iran considers all tourists, from any country and region, their cultural ambassadors.

There are many places in Iran that are the priorities of Western tourists. In addition to historical places, there has been a great interest in visiting the ski resorts and the nature of the country. We believe it is possible to think of the development of these infrastructures with the involvement and investment of Europeans. There are good conditions for cooperation in the area of the restoration of historic monuments. We will welcome European investments in areas such as construction of hotels and resorts for lodging and entertainment. The World Economic Forum (WEF) in a report entitled "index of competitiveness in travel and tourism" has made a study of 141 countries in the world in 2015 and has presented Iran as the cheapest tourist destination in the world. Iran issues visas for tourists from 190 countries of the world to enter the country for a period of 14 days, renewable for a similar period without the need to leave the country. For its touristic attractions like the monuments of Persepolis and the historic cities of Isfahan and Shiraz, Iran has been in top positions on the list of tourist destinations last year, presented by prestigious publications such as the Financial Times and The Guardian. These are potentials that can be developed with the cooperation of European companies with their investments, knowledge and experiences. In view of the valuable experiences of Spanish companies in the tourism industry, we will welcome any cooperation project submitted in this regard.




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