Iran in talks to build financial hub
Economy traditionally relied on oil revenue and consumption by the internal market
Iran plans to set up a financial centre on the free zone on Qeshm island as it seeks to attract financial institutions to a market of 80 million people.
Chinese and Russian banks are seeking to set up representative offices in the area, Farhad Taghizadeh-Hesary, senior adviser to the Qeshm Investment and Development Co., said in an interview. One of Japan’s largest banks is also negotiating with officials on establishing a presence, he said, declining to identify the banks.
“The aim for this financial centre isn’t to look onto Qeshm, but to be a window onto the mainland,” he said by phone. “There is much interest to enter Iran.”
Iran’s economy has traditionally relied on oil revenue and consumption by the internal market. That market provides opportunities for retail banking and project finance The US must do more to encourage banks to do business with Iran following the lifting of sanctions, Iran’s foreign minister said yesterday.
The US and Europe lifted sanctions on Tehran in January under a deal which also agreed to curbs on Iran’s nuclear programme. However some restrictions remain, including on financial transactions, slowing Iranian hopes to reintegrate with world markets.
“I believe the US on paper has removed all the sanctions,” Mohammad Javad Zarif said, but Washington needs to do more to removed the “psychological remnants” of measures which had been in place for decades. “On the banks, I believe it is important for everybody to realise that an agreement will be sustainable if everybody feels they are making gains from the agreement,” he told a news conference in Norway with European Union foreign policy chief Federica Mogherini. “Its implementation must also be a win-win implementation so that everybody feels there are benefits, there are dividends,” Zarif said.
Mogherini said the European Union was engaging with businesses and banks to encourage them to do business in Iran following the signing of the nuclear deal, but cautioned that progress would take time.
“In the first four months this year trade between the European Union and Iran increased by 22 per cent,” she said. “We are very actively engaging with the business community and the banks in Europe and elsewhere to encourage engaging in Iran.” Although challenges remain, developments were heading “in the right direction”, she said. “Europe is committed to ensure that the Iranian citizens can benefit from the lifting of the sanctions,” Mogherini said. as the country vies to overhaul its infrastructure and spend billions of dollars expanding airports, transportation links and its energy sector after the lifting of economic sanctions in January. The International Monetary Fund expects Iran’s economy to expand 4 per cent in the 12 months to March 2017.
“We have lots of feasible projects in different sectors that are interesting to foreign investors,” Taghizadeh-Hesary said. “However, one of the bottlenecks is the lack of access to cheap finance. The financial centre can help us access cheap finance,” he said.
Under pressure
Iran’s banks are financially under pressure because of the lack of access to international capital,” said Payam Afzali, managing director and head of investment banking at Kian Capital, a Tehran-based investment banking and asset management firm. “They’ve had to take the burden of financing the country’s economy for a prolonged time, so they are under pressure,” he said.
Iranian President Hassan Rouhani, who made the lifting of sanctions his top pursuit during his first term ending next year, is betting on an influx of foreign investors and international companies to help lift his country’s economy, which still suffers from inflation and chronic youth unemployment. At stake is his ability to win a second term in the 2017 presidential election.