Iran has undeniable capabilities for economic development

Contrary to major European companies who fled the Iranian market for fear of US sanctions, medium-sized companies have found dealing with Iran to be most lucrative.

Iran represents a potential market of 80 million to investors, not to mention the several-hundred million-strong regional market they would gain access to.

Access to the Iranian market would be paramount to access to the world’s second largest known natural gas reserves and fourth largest oil reserves.

For all intents and purposes Iran is an oil economy, but without oil sales since US sanctions cracked down. Despite Iran having an oil based economy, a blessing as well as a curse, it has long wanted to break free of its oil dependence.

Oil revenue alternatives

Many alternative revenue sources are available Iran, a commonly pursued one being taxation.

Since the start of the current calendar year, the stock market produced big revenue in the country. Unfortunately this revenue was not taxed at all. And in order to encourage natural persons and corporations to invest in the stock market, tax relief was granted. That is so strange and incomprehensible. Another taxable source comes from speculation, which can yield revenue. It concerns gold, hard currency and real estate, which have all been neglected.

Hossein Raghfar, Economist

Another viable alternative to oil revenues would be foreign investment, preferably investment in industry. However, Iran already has key industries and what we call mother machinery to ensure continuation of production.

Would it be better to attract capital to inject into already-existing production lines, or to just look to new investment opportunities, in tapping the capacities of the Iranian economy?

Our problem is incorrect use of capital rather than capital shortage. Unfortunately, in recent years we have failed to make correct use of national hard currency revenue. In 2018 and 2019, as the Central Bank of Iran has reported, we had $180 billion in hard currency revenue and more than $100 billion in hard currency reserve. Had it been managed correctly we would not have suffered the impact of sanctions.

Hossein Raghfar, Economist

Expediting foreign Investment in Iran

There are, admittedly, problems in Iran, for example: the State touch or ‘rulership’ being too prevalent in the economy, external political risks such as US-imposed sanctions, and internal issues such as inflation and bureaucracy.

But there is an entity called the Organization for investment and Economic and Technical Assistance of Iran, OIETAI, through which thousands of medium-sized foreign companies have entered and invested in Iran.

One of the main obligations of the Foreign Investment Organization is to lead, guide and advise foreign investors. A potential foreign investor would need to get familiar with rules and regulations effective in our country, including labor law, customs law, taxation law. At this stage, our experts would provide them with related regulations. The next stage is about feasibility study and market survey. We also help them at this phase. I mean that we have already compiled the available opportunities for investment, in compliance with international criteria, in English, covering all Iran. We have done so through our investment service centers.

Abolfazl Koodei, CEO, Iran Foreign Investment Organization

To make a jump in production, the country requires investment worth 7000 to 10000 billion rials a year. That would be between 23 million and 33.5 million dollars, going by the average free market rate of 300.000 rials to the dollar.

Within the first 6 months of the Persian year, Iran had attracted around 4 billion dollars of foreign investment in the form of projects approved BY the Foreign Investment Board.

In 2019, according to UNCTAD data, we attracted more than $1.5 billion in foreign investment. Another point is about the permits we issue. Naturally when an investor comes to the Islamic Republic of Iran and demands license for investment, it would be time-consuming process due to the nature of projects. In 2019, we had an endorsed foreign investment volume of over $5 billion, $1.5 billion of which has been brought into the country.

Abolfazl Koodei, CEO, Iran Foreign Investment Organization

Iran prefers foreign capital invested in the country to loans since investment means importing technology, boosting production and creating more jobs.

In the words of the Economy Minister, Mr Dejpasand, foreign investors can serve as goodwill ambassadors to their own respective countries. That is to say, Iran’s interests would be their interests to uphold, in addressing their own governments.

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