Iran’s sea trade is several thousand years old. Historically, utilization of seas for the sake of trading has been common for many years among Iranian people. Enjoyment of three thousand sea borders, extensiveness of the north and south coast, linkage between Iran and Hindi Ocean through Persian Gulf, Oman Sea and the most influential exporting and importing ports, all set up specific geopolitical situation for Iran. Therefore, none of the economic activities and important occurrences in sea part should be forgotten.
Although it cannot be declared definitely which country is pioneer in marine economy, America, China, South Korea and Japan have the largest capacity in this field. Economic experts believe marine economy have resulted in China’s advancement.
Islamic Republic of Iran has a potential talent in coastal strip of north and south in which it has played an important role in some parts. It can be referred to marine transport in passenger, bunkering industry arena, marine insurance, offshore industries, and subsidiary industries dependent on marine industry, shipbuilding, port management, ship repair, fisheries, defense industry and marine tourism as effective factors in developing marine economy.
Overall, Islamic Republic of Iran has positive, influential and defendable advances in marine transport. It will achieve best perspectives in the near future with the help of shipping lines, marine industries, related associations, organizations and institutions.
The above-mentioned was an introduction to a roundtable held recently named “investing in marine economy: how and why”. This round-table sat to different aspects of investing in marine economy with the focus on the following factors:
What is investing?
How is the position of marine economy companies in the stock market?
What do transport companies expect from the stock market?
What does the stock market expect from transport companies?
What tools can be introduced to invest in marine economy?
Dose IRISL intend to be considered as the investee and define the advantages of investing to investors?
What priorities do investors consider when investing and what performance should IRISL have in the arena?
How does IRISL encourage others to invest in marine economy and what kind of facilities will it provide regarding this issue?
The members of the roundtable focused on the lack of marine-based strategy as well as shortage in conducting research to assess the strengths and weaknesses of investment demand in marine economy. Also, they referred to the codification of strategy and an investing package as a necessity in order for foreign and domestic investors to invest.
Members participated in the roundtable:
MD of Ayandeh Bank’s Brokerage Firm, Dr. Fardin Aghabozorgi; Rapid Commodity Firm, Eng. Mehrshad Moin Ansari; MD of Iranian Classification Society, Eng. Hassan Reza Safari; Chairman of the Board of International Transport Companies Association of Iran, Masoud Daneshmand; Deputy Secretary-General of the Iranian Committee of the International Chamber of Commerce, Malak Reza Malakpour; Deputy MD of National Investment Company of Iran, Eng. Reza Bakhtiari; Director of Bureau of Studies and Risk Assessment of Iranian Mercantile Exchange firm, Dr. Javad Fallah; former director of Accounting and Stock Management of IRISL, Esmaeil Ghomi Javadi; MD of Investment Company of IRISL, Ahmad Javidi; Director of Ayandeh Bank’s Brokerage Firm, Homayoun Darabi.
MANA: what is the definition of investment in marine economy? And what is the difference between investing in marine economy and other sections? In other words, why investment in marine economy has not yet been appreciated?
Malakpour. R.: Iran is an outstanding country in aviation, marine and road traffic and it is considered as a Golden Cross. During JCPOA in which diplomacy activists played a crucial role, all economic experts of 5+1 countries believed that Iran must use its investing potentials as the major act.
Marine economy includes investing in shipping, shipbuilding, ship repair, training, port and aquatic, mineral and marine resources. Therefore, they should be considered to achieve the covert potentials. In fact, after Soviet Union ceased to exit, all central Asian countries were dependent on Iran. Moreover, they believed to trade through a country which was not a communist and had access to free-waters.
The concession of Iran is rooted in the depth of Persian Gulf and Oman Sea which is deepest near Iran, while Emirates Sea is constructing an island in the region due to its lower depth. Iran’s international shipping takes place through coasts and it is in the depth of 18 meter in Qeshm and 20 meter in Emam Khomeini Port.
Regarding marine tourism attraction arena, he said, Iran has natural potentials and geographical situation. It is noteworthy that we need domestic and foreign investors and there shouldn’t be any discrimination between domestic and foreign investors in which both parties can compete in a proper way.
MANA: How do you evaluate IRISL potentials as an investee company? Is it going to cooperate with other companies in different section of marine economy or to cooperate just in the case of financials?
Ghomi J. E.: there are different investment fields in domestic and foreign arena. Referring to shipbuilding, he said, it has various branches of investing which must be introduced to investors. Hinterlands are special locations for development in this area. Although IRISL trains its manpower, it needs the private sector in this part too. Therefore, different branches of marine economy should be investigated and investors should be encouraged to invest in these different branches. IRISL has never considered any discrimination between domestic and foreign investors. He referred to the lifting of the sanctions to emphasize the fact that IRISL has represented its companies in European countries and several MOUs have been signed recently. Also, IRISL ships have entered South Korean and European ports.
There are major plans in finance issues for the next five years. Financial section of IRISL is acting to provide resources by domestic or foreign investors. It is important to note that return of asset in the field of marine economy is more long-term in comparison with other investments and it is suggested that investors start their activity with a long-term perspective.
Excellent Yield of IRISL
MANA: What expectations does Iranian national investment players have from shipping companies in the investment realm?
Bakhtiari, R.: companies need more effort in investing market in order to finance. To achieve this goal, it is the first step for profitable companies to be distinguished in investing market. The second step is clarifying the information and the third one relates to the understanding of yield and risk in the shipping industry. If a plan or a project enters the realm of the shipping industry, it is considered as base in which investing can take place. Investing markets should operate to gain the greatest amount of GDP.
IRISL provides an excellent yield to stakeholders at the beginning of their entrance to investing market. Short-term stakeholders have to be present in this market. Moreover, marine transport should have clarity in a way that its risk and yield to be calculable in the next five years. Then, many companies will be prepared to enter the investing market. Investors intend to understand the advantage of investing in the LNG industry and to see if there is the possibility to invest in this field or not.
Marine industry is a combined one. We export iron ore and petrochemicals. In fact, the topics regarding docks and other industries are important in marine industry because they are willing to use shipbuilding industry. There are investing grounds in expanding of Oman Coastal area and efficient docks will be constructed in Chabahar of which all investors should be aware.
IRISL Potentials to Be Presented
MANA: How do you evaluate the logical increase of IRISL in stock exchange market?
Fardin A. B.: In order to attract domestic and foreign investors first we have to display our strengths. Some parts of them relate to the prediction of numbers and statistics on a paper and the other parts relate to the features of IRISL directly. IRISL has many investee firms which may wish to make them enter the stock or OTC market and this is a prosperous point to start to show IRISL potentials and finally to be considered as a help in the investing market. It is not appreciated to determine a policy for investors. One may consider a long-term, medium- term or short- term period for the returns of his investment.
Entrance of foreign investors is dependent on the satisfaction of domestic investors in the market. The level of information presented by the company is an important factor. Visiting private sector, banks, institutional investors etc., will inform investors to invest in different departments of IRISL.
Required information should be presented in the field of post- sanctions era’s effect to provide a good ground for investors to invest in IRISL.
Iran Marine Advantages
Javidi. A.: Iran’s advantages in marine industry are crystal clear. Becoming familiar with the strengths of IRISL is of utmost importance. Marine economy is not only defined in terms of marine transport but Marine transport is one of the subjects of marine economy. Development plans of ports and bunkering should be determined because they will help us to determine investment, yield and attractions that an investor should know.
Satellite states had models for their development. According to Iran’s Supreme Leader’s statements, we can attract foreign investors as well as marine tourism. Codification of an appropriate strategy and installation of a policy by legislative authorities are the necessary steps.
Investors concentrate on long- term investment. If s/he knows the yield is at top in this industry, s/he will definitely invest. We should use codified policies to reach our goal. Since the important factor for an investor is the power of prediction, we have to reinforce this factor.
A fundamental leap after lifting of the sanctions should be taken. Market surveys should be investigated. We are facing a global recession in which up to 95 percent of global trade is devoted to marine transport industry. At present, the quantity of global trade has decreased, the market is getting smaller and this means competition in the market.
Fortunately, IRISL has major opportunities in the field of investing and it is our task to introduce the company to the world. Meanwhile, attractions of foreign investors should be created. Since IRISL is a far valid brand of industry, IRISL, providing financials for IRISL is simpler than other industries in the country. To define investment in simple words, one can infer when someone’s properties can be used in a company’s activities; his or her properties will be increased. We have to define the amount of increase in properties as well as the amount of value added specified to an investor in marine economy.
Difference of Iran’s conditions and other countries
MANA: How does the transportation commission of the chamber of commerce monitor attraction of foreign investor in the market? What’s domestic investor’s idea regarding the market?
Studies Institute of Religion and Economy showed that out of 850 foreign companies, 680 companies invested in the field of credit financial institutions, banks and financials. These companies paid less attention to transport industry and they preferred to invest in momentary market. Could you please explain the reason behind it?
Daneshmand. M.: first of all we have to determine the attractions for experts of investing market in order for them to help foreign investors to invest in marine transport industry. For instance, Singapore is a country as big as Tehran with 5.5m population which is located in Malaca Strait and records about annual income of $156.000.000 mainly through the shipping industry. We have to announce that investing in transport trade is profitable.
Transportation commission of the chamber of commerce suggested Ports and Maritime Organization (PMO) to charter some part of its port to IRISL annually in order for IRISL to gain its own market. In fact, port operators should compete with each other.
We have to understand the fact that what the facing problems are in sea and what approaches are available to overcome them? “The best approach is privatization of the sea”. Some sovereign discussions should be considered by PMO unless marine activists try to act competitively. If we are going to develop marine economy, we have to provide loads and the required facilities as well as profitability.
Investing Is Not Limited to Money
MANA: Reputable classification societies of the world which left Iran had agencies before the sanctions in this country. How do you evaluate their presence with the lifting of sanctions? Are they up-to-date in Iran?
Safari. H. R.: the most difficult sanctions have been observed in marine section due to governed standards, norms and international regime. International standards have been defined in national dealings in some countries. For instance, India and South Korea intended to create classification societies and finally they become pioneers in this field. We think about marine economy in terms of shipping and shipbuilding but we should consider marine industry as one package. If marine industry limits to shipbuilding, it will not be profitable. For example, Korean shipbuilding companies assemble vessel’s engines in their own companies. Shipbuilding companies can invest in new building, ship repair and contracting services. Marine economy is not only limited to money. We should investigate entrepreneur models. Investing in marine economy is specialized. If we act professionally in this field, we could win.
Since the advent of shipping companies, international shipbuilding companies, international fisheries, marine tourism, and luxury cruises, marine section is profitable. Marine section is profitable for countries which have national models to compete. Investing in marine economy can be divided into two parts: investing in creating new jobs and endogenous investment in manpower or establishing new firms. IRISL was alone at the time of establishing but now it has different subsidiary firms. At present, Iranian classification societies are international and balanced with international classification societies in a way that PMO present in an announcement that in order for foreign classification societies to enter Iran, they must enter through Iranian classification societies to compete with each other. The purpose of Iranian classification societies is to be the member of IACS and constitute an international classification society.
MANA: Mr. Ansari how do you predict the capacities of investing as an active port investor and what is the feedback?
Ansari. M.: economic activities should be done by people. Investing market will be meaningful when people move the economy forward. Banks can be influential when the economy is in people’s hands.
Bank and the investing market should find investor, not the investor to find the bank. When this process is formed we can explain investing in road, aviation and marine economy. The economy should be controlled by private sector. When sovereignty enters the realm of economy it has to utilize its country’s potentials. As an investor or the private sector I love competition because it helps me to improve. The ministry of Roads and Urban Development or PMO should recognize all different sections of marine economy and devise investing packages to present them to domestic and foreign investors. I’ve started investing in port since 2003, and I was interested to do it professionally. We have to change our perspective; we should increase the fleet of IRISL as a private organization. National shipping has to move forward. The potential of those who work in governmental divisions is more than the private sector.
Evolution Expectations in Marine Economy
MANA: Stock Exchange Organization and OTC market should create tools to provide a decrease in the needs of companies who are active in the stock market in cash flow and dependency on bank systems. What does commodity exchange have done in this field?
Fallah. J.: certificate of deposit product started by commodity exchange. Certificate of deposit product and warehouse receipt transactions helped improve in different countries. Considering the development in warehouse networking in marine field, we can have a good capacity. Certificate of deposit product means that one has a commodity and delivers it to a warehouse which is registered in stock. Then the stock produces a security through this warehouse under the name of certificate of deposit product. This security is the same as others. Some products that have entered Iran Mercantile Exchange gradually become the reference price and help discovery mechanism of better price. Another possibility of certificate of deposit product is securitized bonds. One can use these securities to gain bank facilities as well as providing financial needs from investing market. Commodity funds gather split investments to invest in the commodity. Supreme council of stock securities has accepted certificate of deposit product as security in our country. Some countries have created channels for those who are unable to repay the loans s/ he obtained, another person who has received the certificate of deposit product as collateral can easily sell securities in investing market or out of stock. Commodity exchange in Iran is new. Draft of commodity exchange rule is getting to be gained for financial institutions to accept new securities in a way that judicial institutions can provide required supports as well. These new securities will facilitate activities in commodity market. Considering warehouses in marine field, we are pioneer and this can help us to make evolution in marine economy.
MANA: The government prepares incentives in housing market, how should incentives be transport industry?
Darabi. H.: some basic factors should be considered in marine economy. First of all, related studies should be done. Generally, governments hope to achieve the results of investing in a short- term period but it is out of reach and will be gained after 15-25 years. Second, consulting studies should not be forgotten. One who decides to invest in marine economy should pay more for the studies to be conducted. If a German or Japanese wants to invest in an amount of $100 million, s/ he will pay at least $10 million for consulting. Overall, there is one marine field in global market so it needs strong international studies. When IRISL entered the stock market, Baltic index as an international index of carrying goods, was about 11.500. Now it turns to 635.000. In this situation, investing should provide attractions. According to Article 44 of the constitution, privatization and providing open atmosphere for investing should be done in order for a foreign investor to move forward with investing in Iran. IRISL has scores of subsidiaries which have to enter investing market.
If two factors of long- term investing and the investing itself are studied and deregulation is carried out, investors will be encouraged to invest.
Those who participate in stock are grounding a type of economic democracy.
Challenge in Maritime Economy
MANA: IRISL have been able to be more active during the post-sanctions era and started its operations strongly due to the advantages it has in supply chain. Mr. Ghomi could you please explain the reason behind that?
Ghomi.j. E.: it is appreciable if more professional sessions held in maritime economy field. In fact, hinterland is more profitable. Assaluyeh Port is equipping and we hope to use foreign investment aid in this part. In ship repair field, we invested heavily. Persia Hormoz ship repair yard has been successful in this section in a way that it attracted foreign investors. IRISL share had an appropriate increase during the post- sanctions era. Therefore, it grew enough and provided the best profit to a stakeholder.
Javidi. A: considering good relations of the Managing Director of IRISL, Dr. Saeedi, with domestic and foreign investors, he can solve many economic problems and results will be announced when finalized. Planning team, strategic studies and codification of executive plans in IRISL are all well-organized. According to global economy and the present recession, combination is one of the policies in strategic planning. If capabilities combine, competitions and prices can be controlled, market division will be done in a proper way and ships will have high level of efficiency.
Malakpour. M. R.: there is an important principle in investment. Whenever Baltic index decreases, most of ship-owners develop their companies because of thinking in a long-term period. Central Asian market constitutes 400 million people and IRISL can easily use market planning to address the required needs. We need commercial intelligence. 72 countries have joined TFA. Turkey and Yemen have joined in our region and if 120 countries join the agreement, it will be implemented. Another topic which is proposed in international trading is Safe Harbor which paves the way for integrated port operations.
Ghomi. J. E.: having international nature, IRISL obtained financial statements based on international standards since 2005 and delivered them to international banks. We have access to improved international financial and trading systems based on international standards due to the fact that, the main partner of IRISL was international banks in previous years. IRISL has more than 140 forwarders in Iran which receive cargos across the country. Therefore, when a cargo carrying request is made up to the time that the fee is paid; the process is recorded in the system. IRISL has about 4,000 shareholders and is active in the stock market. Therefore, it provides an open atmosphere to the private sector.