A new era of entrepreneurial enterprise is making its mark on Iran’s modern-day economy, as Dr Mohsen Jalalpour, President of the Iran Chamber of Commerce, Industries, Mines and Agriculture, explains.
What is the role of the private sector in Iran’s 2025 vision and how will the private sector lead the way for Iran’s economic development?
Well, everybody is different so each will explain the new trend of Iran’s economy according to his or her knowledge. For example, with the Minister of Industry you will review the issues in the sector of industry and mining. The Minister of Agriculture will highlight farming and irrigation concerns. Dr Soltanifar will talk about the tourism industry. Dr Ebtekar will discuss the environment. But as the President of the Chamber of Commerce, I represent the private sector so it’s my duty to explain Iran’s new economic trends in greater detail.
The period of sanctions was a tough period for us, but not all of our economic problems relate to this period. This means that we do not expect all problems to be solved after the lifting of sanctions or that our economy will prosper and develop sustainably without a glitch. I believe that our economy has not been developing like it should have for the last 7 or 8 decades. The difficulties we faced during the sanctions made us realize the roots of our economic problems. During the last decades, our economy has moved towards a state-owned economy with state-owned enterprises. If oil revenues did not solve our issues in the past, we would have realized earlier that a state-owned economy is not the best path to follow. Since before the revolution, Iran has based its economy on oil revenue and the price tag for this mistake has been paid with the income gained from our oil.
Today, Iran is facing a new context characterized by reestablished international relations and reconnecting to the world stage. The sanctions period taught us important lessons underlining our economic gaps. Today’s outstanding success is due to Iran’s national commitment and the public’s participation in the country’s affairs. During the elections, we experienced high voter turnout and public participation across the social and cultural spectrum. It is thanks to the cooperation between the Iranian people and the armed forces that Iran can protect its power and preserve security in this region. This is an important advantage. We’ve suffered from economic weakness and problems during the sanctions because we first of all had a state-owned economy.
The second reason is that public participation in general and in the economy was low. Two years ago, before the talks started with the 5+1 countries, Iran’s Supreme Leader outlined its “resistance economy” doctrine based on public participation and developing into a private sector economy.
As a summary, I would like you to follow these three points:
1. Lifting of sanctions. Iran opening up to the international community. Iran to reconnect to the international network.
2. Volatile oil market. A drop in oil prices. Lack of financial resources point to our economic gaps and make impede efficient management of Iran (and its budget).
3. The Supreme Leader’s “resistance economy” is based on people’s participation and a people-oriented economy.
So we have a new paradigm in our economy. Economic development is based on the private sector, on the population’s capacities excluding underground resources and on the public’s participation. This is why the upcoming years will be great years for private sector players in Iran.
President Rouhani highlighted that Iran’s automotive industry should progress and become more competitive by adopting international standards. How does the Chamber of Commerce collaborate with the government and the private sector to make Iran’s business environment more competitive?
In the new period that started nine months ago, the Chamber of Commerce’s first request was to make the economy more competitive. In the past, economic actors and the Chamber of Commerce looked for support from the government, which does not enhance competition. Back then, the Chamber and the private sector were trying to take advantage from the country’s high oil revenue to develop their own interests rather than creating a competitive environment. In today’s new era, the Chamber of Commerce and the private sector are pursuing to form a competitive environment in a free market economy.
The message of President Rouhani and the authorities is a message coming from the private sector. Our message is very simple: the past situation of our country whether good or bad, proper or inappropriate, is gone. Today is a new day and we have something new to say. It’s a clear demand. The conditions for economic activity must be clear, competitive and based on international relations.
We are preparing the country to join the WTO, so we must ensure a proper competitive environment in which Iran participates at the international level and where international players participate in Iran. We do not object to what happened in the past. But we believe that a competitive environment and the adoption of a new competitive paradigm will improve for example, automobile manufacturing. Our request is for the automobile manufacturing to be competitive. There is nothing better to produce cars for national consumption and for export in this environment that will become increasingly competitive.
We should not subsidize a specific industry, as this will obstruct healthy competition. We suggested, and the government insisted, that exports and international markets must be considered in new automobile contacts, which has happened in recent signings with French and Japanese companies. I believe that our private sector has the right capacity and capability when active in an appropriate and competitive environment. Even if you do not agree with this idea, we should be aligned with the world market and focus on our potential where we can compete internationally. Each country of the world has its own competitive advantages and should concentrate on developing these strengths. In Iran too, we should concentrate on our own capacities and strengths, and cooperate with other countries in areas where we are behind.
What are the main strengths of Iran’s private sector?
Iran is a young nation, with a highly educated work force. Iran has a lot of God-given natural resources like energy, mines, and a climate you cannot find anywhere in the world.
The most important strength of Iran is its geographical position, as it connects North to South and East to West. Iran has a lot of potential in becoming a logistical transit hub for tourism, oil and gas, and electricity. Nowadays the greatest advantage for national economic development is innovation, ideas and creativity. Iran has an interesting start-up scene and international delegations that visited them were impressed by Iran’s high capacity in science and creativity. We are among the world’s top 20 countries in science development and top three in the region. We don’t have a good ranking in creativity. Our suggestion to those who want to collaborate with Iran in the field of science is to use Iran’s scientific potential to create value for businesses, for Iran, the region and the world.
Security is another strength of Iran. We are the most stable and most secure country in the region. Fundamentally, Iran does not have any threat of extremism and sectarianism, despite the fact that Iranians have endured difficult times. If you look at Iran’s history, it is the unity between people and the government that have made Iran so secure. The region is a strategic area in the world and Iran has an important geographical position in this region.
Iran’s young and educated work force, scientific competences, God-given natural resources, different climates, security and stability, as well as the interest to develop creativity and innovation are Iran’s main strengths that offer the right environment for the private sector to flourish.
Iran targets to reach 8% real GDP growth. Experts say that to be able to achieve this Iran needs between $30bn to $90bn of annual investment. How important is foreign direct investment for Iran to reach and accomplish its 8% goal?
At the Chamber of Commerce, we follow three points with regards to attracting foreign investment:
1. We should plan Iran’s strategy to attract foreign capital in collaboration with the authorities. Then we have to identify the sectors and fields in which we accept foreign investment, the ones in which we do not accept foreign investment and the others where Iranian companies need international cooperation. We believe that foreign investment is a double-edged sword. If we don’t use it properly it will have side effects on the country’s current economic situation. This is why we are working on a strategy and a plan to absorb foreign investment according to our needs.
2. In order to attract foreign investors, we need to improve the business environment. The international Doing Business ranking measures the attractiveness of countries according to ten assessment criteria. With the help of the government, we are looking at each criterion to improve Iran’s business environment so that we can climb higher in the international rankings. At first, Iran started in 152nd position out of 176 countries. Today, we have climbed up to 118th position and we hope to reach a double-digit ranking by the end of 2017. Our goal is to rank below 50th position by the end of Iran’s Sixth Development Plan. We are working to reduce permissions, facilitate banking operations, facilitate company registration, reduce administrative bureaucracy, and to improve business related judiciary processes. Instilling a culture of business improvement is a major achievement by the Chamber of Commerce. Right now, all authorities are aligned and believe that the business environment of the country must change and must improve. By the speeches and interviews, you can tell that authorities have adopted this new idea. This shows that Iran is able and ready to institutionalize a culture of healthy competition.
3. In this context, we are doing our best to position the private sector at the heart of the country’s economic activity. We have repeatedly stated that Iran is open for private international investment. We believe this is the base for a competitive environment in the country. Our full attention to the private sector will result in a free and more competitive economic environment.
Numerous delegations from the world over have visited Iran in the past year. In December 2015, you stated that you are planning to deploy Iranian trade delegations abroad. Could you tell us more about your objectives and strategies to promote Iran in these countries and what countries are prioritized?
Our statistics show that about 200 delegations have traveled to Iran so far. I have visited some of these delegations personally. I am happy to tell you that Martin Schultz, Head of the European Parliament, who recently came to Iran, brought me a message. He came from the airport directly to the Iran Chamber of Commerce. And told me that all delegations that visited Iran went back to Europe with a common view: Iran presents new opportunities for investment and is looking to attract technology in a more collaborative way. Iran is transforming to become a production factory serving the region’s 400 million population. Iran has this potential because it is the only country with security and stability in the region.
Countries must change their approach towards Iran. They should also change their legal agreements with Iran and adopt Iran’s new conditions. It is clear that Iran is not just a country of consumption; it is a country that produces for internal use and for the region, where we have already sent and will send more delegations. Experience has taught us that we should not solely rely on one part of the world. We have relations with most countries of the world. We are receiving and sending delegations to different parts of the world. Of all the delegations, around 40% of them were from eastern Asian countries and approximately 60% of them were from 5+1 and European countries.
As the president of the Chamber of Commerce, I try to visit as many countries as possible. We planned and just traveled to Italy and France accompanying President Rouhani. Last week we sent a delegation to Germany. The second week of April we sent a delegation to accompany President Rouhani’s visit to Austria. At the same time we are sending delegations to China, India, Singapore and Mexico. Two or three weeks after the Nowruz, the Iranian New Year, we will send and receive delegations to and from different countries according to our priorities. What is important is that we are ready to cooperate with countries that are interested in joint economic development with Iran.
You said that the European parliament had a message for you when they visited Iran. What would be your message to European delegations in return?
I always have this message for European delegations: trust and have confidence that Iran has a good position in the region. Courage is always one step further than income. If you venture today and come to this region, be sure that for several years you will have income and an enduring presence in the region.
I have visited around 50 European, American, Asian, and African countries in recent years, and as an objective economist I believe Iran is a unique and most prepared country for long-term investment. I do not deny that investment conditions can be difficult in Iran. People who accept the challenge can transform these difficulties into money making. A person who wants more money must accept more complexities. If you take a closer look at Iran’s past five decades, you will see various ups and downs due to regime change, war, peace, nuclear issues, sanctions, sanctions lift. Throughout all these events, businesses in Iran have continued to operate and generate income. Working in Iran is difficult, but if one accepts the difficulties and decides to invest, he or she will always realize proper income. No danger is threatening the investor that comes to Iran. Until now, no investor has experienced financial losses in Iran despite facing these difficulties.
How can cooperation and sustainability benefit future generations?
I believe that whether you are Iranian, European or from other nations, all people around the world are thinking about each other. I want to share two things with you.
Firstly, the world today needs to preserve its environment. People are treating the Earth in a way that they think we have a spare Earth in the trunk of our car. It is our responsibility to manage environmental issues and preserve the Earth for the next generations. Environmental concerns are more dangerous than wars. They can potentially destroy countries quicker than wars. Environmental concerns are the first threat to people all around the Earth. So I ask everyone to share this message with everybody you meet. It is our social duty to pay attention to the environment, whether you are an economic player or not.
Secondly, I want to highlight the unpleasant conditions that wars, conflicts and extremism bring to our world. I believe that it is economic interest that is at the root of these wars, more than religions, beliefs or ideologies. I believe that if people were living in welfare, they would not undertake such activities. So, if we want to improve living conditions and create peace and friendship all around us, we should prepare an appropriate economic environment. We should create jobs and welfare for people. Our region is safe when people have welfare and prosperity. I believe that over 90% of problems like extremism, smuggling and murder have economic roots. If Europeans that live in safer parts of the world want to preserve their security, they should pay more attention to these issues. Mass emigrations will have consequences in the near future.
To preserve security, peace and the environment in the world we should cooperate together to rebuild the Middle East where a lot of unfortunate events happen. Therefore, investing in Iran or in the region includes a socially responsible stance towards Iran and the region. I think it is necessary to have a more serious look at this. We can take advantage of Iran’s new momentum to have a stable and healthy region from which everybody can benefit.