Foreign Investment in Iran

News ID: 66179

Date: 17 July 2016 - 09:51

The arrival of tens of foreign delegations for establishing economic and trade relations during the last year provided Iran with an important resume and background, which would help the country to use its potential and real advantages in a proper and optimized manner. Part of these relations is the legacy of ties that Iran has had for decades with top countries of the world, particularly the ones enjoying reputation in trade and business.

Iran’s vitality for most of the countries all around the world, specifically neighboring states of Central Asia, Persian Gulf littoral states and the main neighbors is obvious. The prominence of Islamic Republic is not only rooted in position and reputation Iran has gained during centuries, but also it partly stems from the capacity created in past decades.

Economic analysts and experts often consider Iran as an important country due to its past position in Silk Road or due to its natural resources particularly oil fields, however the global geopolitical developments and the new economic arrangement of the region along with political developments of some neighboring states during last decades has converted Iran’s position offering it great importance in some dimensions.
Part of these developments are the result of political changes of Iran’s northern neighbors, which have established a new political and economic system called “Commonwealth of Independent States” (CIS) after declaring independence from the Soviet Union about two decades ago. CIS has created a vast market for Iran making the Islamic Republic concerned about the position of its member states.
In other words, the countries once considered a threat to Iran, have turned to states regarded as opportunities for further economic ties in recent years making the ties clearly beneficial to both sides. On the other hand, economic investment both in Central Asia and Iran could create a great market for other countries of the region. Economic ties of Iran and Central Asian countries have provided new horizons in the field but the fact is that the potential has remained untouched in parts of these countries geography. Central Asian states, have to be taken into consideration highly not only due to their particular geography and marine territories, but for the geographical role they could play in transiting goods to northern and central Europe.
Besides Iran’s northern neighbors and the benefits of littoral states of Caspian Sea, Iran’s southeastern coastlines possess great capacity as well. Two corridors of world’s three main corridors pass through Iran’s southeastern seashores and Sistan and Baluchistan province proposes Makran region as the transit road of southeast developmental plan.
Makran coasts are considered geopolitically, geo-strategically and geo-economically highly important due to their strategic location and features including access to rich energy resources, dominance on the most important corridor of the world for energy and goods transit, strategic location to provide access to high seas for land-surrounded Central Asian countries, Caucasus and Afghanistan, great capability for establishing ports and trade terminals and becoming a hub for import and export through north-south, east-south and south-west corridors from Chabahar Port to Central Asia, Caucasus, Russia and parts of Europe.
Makran intact coastlines are ready for thousands of kilometers of investment and some countries including China and Pakistan have announced readiness to invest in petrochemical fields in Makran. At the same time the existing harbors have the capacity to attract investments to develop their hinterlands.
Although the investment in maritime transport is concentrated mostly on sea and coastlines, but the hinterlands value for investment should not be neglected. Countries investing in Makran hinterlands would see its benefits in maritime transportation lines directly. This would be a clear criterion for deepening the investments regarding further guarantee and security in volume of the investing
On the other hand, thanks to government’s heavy and maintaining investment in implementation of the first and second phases of Shahid Beheshti Port and Chabahar Free Trade Zone, strong infrastructure has been established for foreign investments. Accordingly, India’s participation in installing strategic equipment in order to use the existing potential is among the priorities of the government. Investment and activating a network of foreign investors like India, Oman, China and Pakistan, aside from government’s strategic plans, is also part of the sixth economic development plan of Iran. The plan includes a legal article which aims at establishing an organization to meet this end; “the establishment of Makran Development Organization as a developmental body with corporative nature in charge of planning, execution and supervising the process in Makran coastlines has been proposed; the organization would shoulder authority and duties of executive bodies, public institutions except the ones related to defense, security, judiciary and foreign affairs, all governmental properties and assets as well as all projects in Makran.”
Once operated properly, Iran would be able to establish new ties with countries like Oman, Afghanistan and Central Asian countries as a result of cooperation in Chabahar. Though there would be possible rivalry with Pakistan’s Gwadar, yet the new capacities of the region would introduce Chabahar Port as the optimized hub.
The plan indicates Iran’s will to establish trade relations with India, Oman, Pakistan and particularly Central Asia and Caucasus in near future. This is because Chabahar Port is considered as one of the main junctures of southern corridor of global trade and has a special position in trade between Iran and regional countries due to its strategic location and access to international waters
Given the importance of the Caspian Sea and Sea of Oman, activation and standardization of ports like Anzali, Amir Abad, Astara and Shahid Beheshti would serve connecting the transportation lines including railroad, road and maritime and could help improve foreign investment. Factors involved in creating such a capacity and attracting foreign investors are numerous, efficient human resources, easy access to abundant and inexpensive energy, geographical superiority, possession of proper port and shipping infrastructure ready to develop, great domestic consumption market and coverage of a 400-million market in Central Asia.
However, the discussed issues are mostly related to capacities of the Caspian Sea, Sea of Oman and Makran coastlines and their hinterlands. Iran has postponed a great deal of activities and plans for activating the full capacity of its ports for any reason. Regarding the unique capacity of Hormozgan province specially Lengeh ports and Qeshm Island which have an acceptable drought as well as part of Imam Khomeini Port which has a positive record of its real position, there is hope that in near future Shahid Rajaei Port would turn into a helping arm for the ports newly launched.
On the other hand, the position of Iran’s shipping lines provides a golden opportunity for foreign investment as it is tied to a vast market inside Iran and in neighboring countries. The access to 80-million domestic market along with expansive markets of Afghanistan, Central Asian countries and Persian Gulf littoral states could make the foreign investment a launch pad for any country.
One of the most important and most efficient sectors for investment in shipping is the export of mineral stones and bulk mineral products of Iran. CIS countries’ annual import of bulk mineral products is equal to 200 million tones, which could be taken into consideration with more strategic depth if welcomed by foreign investment. Besides, little is known about Iran’s rich resources and their discovery would be promising.
Investing in the shipping industry has always been based on two elements: boosting Iran’s share first in international trade and then in ship-building industry, which Iran owns a great capacity for
The share of ship-building industry in Iran is considerable as the country receives several orders in different levels annually. The orders have often been followed by certain deal of distorts. During the last 50 years Iran has tried hard to initiate and apply the ship building industry but the industry has not reached its proper position due to several obstacles. It is certain that if pioneer countries of the ship building industry have the intention to establish the industry in Iran, they would be able to create bilateral ties by investing in Iran. Technical resources along with background of such an industry and providing some needed guarantees by related organizations could help set the ground for these kinds of investment.
Iran’s maritime transportation industry, like any other country, would find meaning along with other transportation lines, country’s infrastructure and the easing of current rules.
Iran’s government, in a new era of history after the Islamic Revolution, is determined to make use of all its efforts in attracting foreign investors.
Iran’s minister of road and urbanization has recently noted the investing opportunities in field of maritime transportation underlining that during last year many foreign liners have started direct berthing at Iranian ports. This is while previously foreign ships used to berth at ports located in south of Persian Gulf and dispatch the goods via feeder vessels to Iranian ports. But at the moment 16 liner ships are directly berthing at Iranian ports, which reduce the expenses of Iran’s maritime transportation.
Therefore, according to his viewpoint, in order to provide a rivalry atmosphere between Iranian and foreign shipping firms considering the financial power of the other party, Iran, instead of granting any facilities to Iranian liners, has announced that the condition for foreign liners’ presence in Iranian ports is transportation of 50% Iranian goods and 50% foreign goods to be transited to destinations in the region. This is the only means Iran would support foreign liners and grant them windows.
However this is the domestic dimension of such advantages. The external dimension is that Iran, due to its specific geographical location, has the ability to establish transit lines for most of these liners, which could benefit from transiting goods in these lines.
So, the noteworthy point about Iran is that its market is still open to goods and services broadly. This is why the will of foreign economic delegations for participation in Iran’s market has soared during the post-JCPOA era.