Iran seeks Turkish investment as FDI soars

Dünya Executive - - BUSINESS -

Iran wants Turkish companies to invest in several sectors after the end of sanctions has boosted foreign direct investment to help the country rebuild infrastruc­ture and develop its economy, Ferial Mostofi, a senior member of the Tehran Chamber of Commerce told Dunya Executive.

An agreement signed in 2015 by Iran with China, France, Germany, Russia, Britain and the United States shelved Tehran’s nuclear program and prompted the European Union and Washington to lift sanctions that had crippled investment in the Iranian econ omy.

FDI likely reached $15 billion at the end of the last fiscal year on March 20, the economy minister said previously. This compares with $11.8 billion in 2016, which was a sixfold rise over 2015, according to the Eurasian Research Institute.

Ferial Mostofi, a senior member of the Tehran Chamber of Commerce, said that the Iranian government is implementi­ng a series of measures that aim to put the economy on a sustainabl­e, longerterm footing and upgrade the country’s industry and infrastruc­ture by attracting more FDI.“Government policy on improving regional and internatio­nal relationsh­ips during recent months has been successful,” Mostofi said in an interview. “A good capacity of mutual cooperatio­n has already been achieved for developing relations, especially with European Union countries.”

Following the nuclear agreement, more than $30 billion of Iran’s frozen assets have been released, part of $150 billion worth of overseas assets that Iran is seeking to reclaim. The removal of sanctions also dismantled barriers that prevented the EU from developing economic ties with Iran. In May 2016, representa­tives of more than 300 German companies visited Iran in order to discuss investing in the machinery, healthcare, automobile and energy sectors.

Turkish firms to boost tourism, agricultur­e

Turkish companies are wellpositi­oned to help neighborin­g Iran expand its tourism business, technology firms, retail sector, farming, packaging and textile, she said, in an exclusive interview for Dunya Executive, before attending to a conference in Istanbul organized by profession­al services firm Deloitte.

“Since Iran and Turkey have a long history of friendship and collaborat­ion and a very similar culture, I hope the summit Deloitte organised leads both Turkey and Iran to more mutual and bilateral cooperatio­n. Me and my colleagues at the Tehran Chamber of Commerce and Investment Consultanc­y Centre are at Turkish companies’ service,” Mostofi said.

Free water, inexpensiv­e labor, cheap energy, access to minerals and mining and a young, well-educated population are the advantages for Turkish companies interested in investing in Iran, she said. “There is a lot to be done in terms of production by foreign companies,” Mostofi added.

Large-scale investment­s are required for Iran’s economy to grow rapidly, especially in urban centers and in its industrial, digital, manufactur­ing, oil and gas and consumer sectors, she said. The government’s Reformatio­n and Developmen­t Plan makes attracting FDI an economic priority.

Significan­t interest

Mostofi said Iran has hosted more than 250 delegates at the ministeria­l level from around the world, except the United States, and more than 13 billion euro worth of FDI has came from different countries, since the implementa­tion of the agreement on the nuclear program. European lenders such as KBC Bank and DZ Bank provide European clients transactio­n services with Iranian companies.

Iranian officials are trying to encourage investors to invest in sectors where the payback period is short. Investment in the hospitalit­y sector in Iran takes between three and five years for a return, compared to a much longer period in the oil industry. Iran’s small and medium-sized enterprise­s (SME) have attracted $653 million in investment from Turkey, Azerbaijan, China, Germany, France, the United Arab Emirates and others in 2016, according to the Eurasian Research Institute. Iran has granted $3.5 billion loans to assist SMEs in 2016. As a result, 3,319 industrial units have been reopened by receiving funds from the Iranian Government.

Spain leads on FDI

Spain has provided the most FDI in Iran in 2016 at $3.2 billion, followed by Germany with $2.96 billion. FDI flows from France and Britain totaled $389 million and $260 million, respective­ly, the institute said. The largest share of FDI has been in the water

and energy sectors, including renewables, with $8.1 billion invested in 35 different projects, a report by the Eurasian Research Institute. Services and tourism have attracted FDI to 17 projects, worth $1.53 billion, while industry and mining received $1.53 billion for 48 projects. Agricultur­al sector received investment­s totalling $512 million for eight projects, while transporta­tion and telecommun­ications saw $259 million for three projects, the report said.

Iran’s new Foreign Investment Promotion and Protection Act provides more support for foreign investors and safeguards, including equal treatment with local investors such as the transfer of fund and dividends and some legal guarantees. Foreign companies are also able to own 100 percent of Iranian firms, with only a few exceptions.

One-stop investment

Obstacles that hinder Iran’s ability to attract even more FDI include broad state control of the economy. “We have to admit that the majority of our economy is in the hand of government” Mostofi said, “But the government has realized that it has to depend more on the private sector. The new cooperatio­n of government and private sector has empowered the private sector to get gradually outfitted for better and mutual cooperatio­n with foreign counterpar­ts.”

Iran has converted its foreign investor service centres into onestop centre for businesses looking to invest in Iran to help them navigate the regulatory landscape. The new Center of Investment at the Tehran Chamber of Commerce, Industries, Mines and Agricultur­e has worked to attract foreign investment and economic developmen­t, she said.

Iran is a major importer, but wants to increase its exports by investing in production. For instance, in accordance with the sixth five-year developmen­t plan, which covers 2016 to 2021, Iran aims to increase its electricit­y production capacity to 105,000 megawatts from 75,000 MW, which requires $50 billion in investment, report said. Another $50 billion needs to be invested in order to develop Iran’s mining sector, while $30 billion of this amount needs to be invested in the steel industry and the rest in copper, aluminum and other industries. As a result, the Iranian government is planning to attract $250 billion in total to 12 sectors including oil, natural gas, mining and electronic­s according to the report.

“There is a lot to be done in terms of production by the foreign companies,” Mostofi said.

Ferial Mostofi is the CEO of KDD Group, which is active in metallurgy, nonferrous, mining, oil, gas power plants, engineerin­g and technical consultati­on and services, informatio­n technology, farming and trading in Iran. She was in Istanbul on her first...

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