06/27/2016, 22.08
IRAN

As sanctions ease, foreign investment to pour billions of dollars into Iran

In terms of greenfield investments, Iran was ranked 12th of 14 between 2003 and 2015 with a 1.6 per cent market share. This year, the Islamic Republic jumped to third place, behind the United Arab Emirates and Saudi Arabia with an 11 per cent share. Jobs and capital spending are also up. South Korea and Germany are the main investors.

Tehran (AsiaNews/Agencies) – The partial lifting of sanctions has jumpstarted economic growth in Iran and raised its investment potential in the region. This is leading the Islamic Republic to reopen its doors to foreign investors, creating an inflow of fresh capital.

Data from fDi Markets, an FT service, which monitors cross-border green field investments*, shows that before the lifting of sanctions, Iran was ranked 12th out of the 14 Middle East nations for Foreign Direct Investment between January 2003 and December 2015, equal to a market share of 1.62 per cent.

Since sanctions were lifted this year, Iran has climbed to number three with a market share of 11.11 per cent, behind regional powerhouses United Arab Emirates and Saudi Arabia.

The agreement to lift sanctions in exchange for a significant reduction in Iran’s nuclear programme was initially inked in July 2015. But implementation did not occur until last January.

As sanctions fall away, billions of dollars of overseas assets will unfreeze and oil will be sold internationally.

Since 2012, sanctions had cost Iran more than US$ 160 billion in oil revenues. Despite holding the second largest gas and fourth largest crude oil reserves globally, Iran has flagged behind other emerging Middle Eastern countries.

The election of a moderate as president, Hassan Rouhani, in 2013 and the easing of Western economic sanctions in January 2016, following the nuclear deal reached in July 2015, are the two key factors of change. This is reflected in various areas, from the economy to architecture.

Still, the United States has kept in place a range of sanctions because of Tehran missile programme and its military support for Shia movements in the Middle East.

Recently, Washington also blocked the use of the dollar in bank transactions, stopping new deals despite the nuclear agreement. This in turn has helped Iran’s hardliners against the president’s reform programme.

These obstacles have not however prevented Iran from attracting more and more foreign investors and capital. Iran won 22 FDI projects, the highest rate of investment since fDi Markets began recording data in 2003.

Job creation and capital expenditure also rose between 2013 and 2016. Whilst some 352 jobs were created in 2013 with capital expenditure of US$ 79m, this jumped to 2,732 new jobs and capital expenditure of .67bn in 2014.

Since sanctions were lifted. Iran attracted investments for its automotive sector, business services, consumer electronics and textiles, among others.

The principal countries investing in Iran were South Korea and Germany, which together committed to capital expenditure of .15bn.

For fDi Markets, the upward trend is expected to continue. So far at least 19 foreign investors have shown interest in the country, 90 per cent more than last year.

* A green field investment is a form of foreign direct investment in which a parent company builds its operations in a foreign country from the ground up.

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