If there is a seat left in business class on a flight to Tehran, you might be hard pushed to find it. Ever since Iran signed its nuclear accord in January lifting longstanding sanctions, businesspeople of every kind have been making their way to the country in the hope of clinching a deal.
Iran’s main industries have suffered from underinvestment, its consumers have been starved of choice and billions frozen in overseas accounts are in the process of being released.
The country’s reintegration with the international community is well underway and with it comes a drive to return the country’s business activity to a state of normality, whether it be the strategic industries like oil and gas, or consumer retail, Gavin Hinks wrote for the UK-based magazine Financial Director.
Jan Ward, chief executive of Corrotherm International, a former exporter of specialist piping to the energy sector in Iran, tells Financial Director: “I’ve been waiting for them to remove the sanctions … I absolutely love going there.”

  Under Starter’s Orders
From news reports however, it’s obvious that many companies did not wait for the ink to dry on the final settlement. In anticipation of an agreement, many had clearly been in Iran to negotiate well ahead of the diplomats.
Within days of the agreement being signed, Airbus finalized the sale of 118 planes to Iran Air worth $27 billion. Though conditional on obtaining US export licenses (10% of Airbus parts are made in the US), the deal will see Airbus build 73 wide-body jets and 45 narrow-body planes for Iran, which will also take delivery of several A380s, the world’s largest jet aircraft. More importantly though for Airbus, they have beaten Boeing to the line in helping Iran rebuild its raging passenger aircraft fleet.
Elsewhere, President Hassan Rouhani forged a deal with Italian metals producer Danieli, reportedly worth $5.7 billion, to produce steel and aluminum for machines and equipment.
A few days later, Japan and Iran sealed an “investment pact” intended to give Japanese investors the edge when it comes to providing capital for Iranian projects.
For British exporters, however, there’s one important point to note. None of the high-profile deals announced were with British companies.
“The big thing is to get out there and meet the people. You’ve got to find a partner. The Germans, French and Italians are out there in their hordes,” says Ward.

  Reasons
And why wouldn’t they be? Iran is a country of about 80 million people with a GDP of $406.3 billion, making it the second largest economy in the Middle East.
President Rouhani’s reforms have also seen the country turn a corner after two years of recession: 2014, according to the World Bank, saw the economy grow by 3%, with many, including the Institute of International Finance, expecting 2015 to see growth of about 6%.
The World Bank reckons on 5.8% this year and 6.7% for 2017. These figures though are predicated on transformation, once the sanctions are lifted.
Inflation is also down from an eye-watering 45% in 2012 to 15.6% as of July last year. Unemployment, however, has proved difficult to budge and remains around 11%.
In September last year, the World Bank wrote: “Reforms to the business environment to promote competition, rationalize licensing and authorization requirements, reduce the imprint of state-owned enterprises in the economy and improve the health of the financial and banking sector are needed to accelerate growth and private-sector led job creation.”
Yes, there is a job of work to be but the population is well educated and young, with some estimates placing 65% under 35.

  Banking
Sanam Vakil, associate fellow at international affairs think tank Chatham House, has some good news for UK businesses. She says no one country is going to monopolize business in Iran, as the deals publicized so far have proved.
“It’s been much easier to do deals with the Italians, French and Germans who have longer standing relations and remained active in the region regardless of sanctions,” she says.
But Vakil adds the “onus” is on the British to move things forward more quickly. She observes the British Embassy has been slow to reopen in Tehran.
However, the British have moved swiftly in one area–Iranian banking—an essential issue for exporters.
The whole sector is one where many outstanding issues need to be resolved, according to Vakil.
However, three UK subsidiaries of Iranian banks–Persia International Bank, Melli Bank and Bank Sepal International–have already received regulatory approval to go back to work after being helped by the startup banking unit of the Prudential Regulatory Authority.
This is timely, because a report from professional services firm Mazars published in January highlighted key areas for improvement following a survey of financial reporting at nine Iranian banks.
Mazars concluded the sanctions had left “deep scars”. Iranian banks are yet to adopt Basel I and II, “let alone Basel III”, says the report. IT and cyber security “are in their infancy. Corporate governance needs revision to meet international best practice,” says the report, and “international-accepted accounting and reporting standards need to be implemented”.
Greg Simpson, head of UK banking audit at Mazars, says International Financial Reporting Standards will become applicable for listed Iranian banks from 2016, though not all banks are listed. He insists, however, that there is a “strong willingness” to adopt greater transparency.
The fact that UK subsidiaries have been reactivated by regulators demonstrates they have “adequate capital and liquidity to satisfy regulatory requirements”, according to Simpson.
He adds: “One of the main impediments to resuming normal trading is establishing correspondent relationships with international banks. However, recent announcements by Dr. Valiollah Seif, the governor of the Central Bank of Iran, indicate there is an increasing desire by international counterparts to facilitate trade relations.

  Frontiers
Strong institutions will be essential to the reform and reintegration of Iran and the country is not short of them. In fact, Vakil notes the country may have so many that decision-making on issues like petroleum contracts are slow and uncertain.
It’s a point echoed by Hassan Hakimian, director of the London Middle East Institute at SOAS, who recently wrote that Iran’s “complex post-revolutionary institutional architecture, which is beset by a labyrinth of decision-making entities interlaced with yet more bodies and agencies created to ensure compliance with Islamic tenets and revolutionary standards”, is one of the key challenges in reforming the country.
That said, Hakimian is optimistic that trade can be done, referring to Iran as a “frontier market”.
“When you think about it, Iran is one of the few countries where you don’t face a big US competitor,” he tells Financial Director.
“There are opportunities in consumer goods, the energy sector and in replacing the country’s infrastructure.”
According to Hakimian, the big risk in Iran is President Rouhani’s ability to deliver on expectations of economic improvement, the basis on which he was elected and the reason for recent success in parliamentary polling. He faces presidential elections in 2017 with victory critical if Iran is to maintain certainty around its current path.
“There’s no market with no risk whatsoever,” he concluded.

Iran will inaugurate 15 new petrochemical  projects by March 2017.

Marzieh Shahdaee, Director of the National Iranian Petrochemical Company’s plans, said this will boost the country’s petrochemical capacity by ۸.۵ million metric tons.

“There are 60 petrochemical plans underway in the country, " she said, adding that plans which are over 60 percent complete are main priority. She said the mentioned plans require $33.4 billion worth of investment to come on stream.

Seven petrochemical units, with a total capacity of 2.7 million tons, will come on stream by March 2016, she added.

The country has exported some 12 million metric tons of petrochemicals so far.
Iran plans to increase the number of its petrochemical units to 100 and the value of petrochemical exports to $70 billion over the course of 10 years, he said.

Iran’s petrochemical output has exceeded 40 million metric tons since the beginning of 2014.

By Mahnaz Abdi

Iran welcomes boosting trade ties with the European Union in a way that European investors could take advantage of unique opportunities in Iran and Iran’s economy could accelerate the process of its growth and development, according to Central Bank of Iran (CBI) Governor Valiollah Seif.



Seif made the remarks in “The 2nd Business and Banking Forum Iran Europe” which kicked off in Tehran on Saturday and will run until Monday.

 

In January world powers led by the United States and the European Union lifted sanctions on Iran which had been imposed over its nuclear program. The subsequent leap in Tehran’s stock market in late January and early February gave a hint of the country’s investment potential.



The lifting of sanctions opens a new chapter of economic development and put the country’s potentialities into practice, Seif added.



The ground is laid for more security of foreign investment in the country and also for more economic sustainability, he maintained.



Iranian economy enjoys great advantages such as educated and expert manpower, huge natural resources, cheap price of energy, big market inside the country and also access to the regional markets, the official highlighted.



“I hereby invite all European investors, service institutes and also banks to take the advantage of unique opportunities created in Iran in the post-sanctions time”, the CBI’s governor stated.



He also said that all Iranian banks are now connected to the SWIFT international payment system.



---- 2016 economic growth above 5 percent



Elsewhere in his remarks, Seif said that Iran’s economy is expected to witness an economic growth of more than five percent in 2016.



“Economic growth slowed down in 2015 but domestic and international predictions both indicate that growth in 2016 would be beyond 5 percent,” he added.



*** European banks should avoid conservatism



Addressing the same forum, Mohammad Khazaei, the Iranian deputy economy minister and also the president of the Organization for Investment, Economic, and Technical Assistance of Iran, said: “Let me be honest with you, I see some conservative approaches from European banks to work with Iranian banks. I would like to make it clear here that conservatism is the big enemy of taking advantages in Iran’s market.”



Banks are the routes of collaboration, transferring money, so any problem in this area of course is a big obstacle in the way of cooperation, the official stated.



He went on to say: ”Because Iranian banking system and Iranian businessmen have been away from their traditional counterparts [during the sanctions times]; therefore we need to get together again and know how the banks can get together and there are many issues that we should solve and then we can also move.”



Elsewhere in his remarks, Khazaei said Iranian government has adopted policies to support foreign investment especially in the fields which bring value added, such as transfer of technology and increase of exports.



He mentioned facilitation of investment making through cutting some administrative and trade barriers as one of the mentioned policies.



Iran will take the same approach toward the foreign investors as that towards the Iranian ones; the official stated, adding: “Based on the law, your investment in banking sector in Iran is protected and guaranteed by the laws, so there is no impediment or problem to work in this area.”



The foreign banks and investors will be granted tax exemption of 20 percent in the mainland and 100 percent in the FTZs of Iran, he announced.



*** ‘New, big opportunities in Iran by sanctions removal’



Matthias Machnig, the state secretary at Germany’s Federal Ministry for Economic Affairs and Energy, was the other speaker in the forum.



He said: “Now by lifting of sanctions there are new and big opportunities. It is very crucial that in these conferences we talk together to build up trust. I hope this conference will build up new relations and we will be able to define projects where we can work together and can build new basis for our economic and political relations.”



“We want your country being a constructive partner, not only in this region, but also in the international level and hopefully we are able to take this opportunity and find new ground for a common work together”, he added.



European and Iranian companies now want to take advantage of the resulting opportunity as quickly as possible, Machnig said; adding there are a lot of opportunities for long-term partnership which can benefit both sides.



*** Views of some foreign participants



One of the participants in the forum, Sonke Reimers, the managing director of Germany’s dfv media group, told the Tehran Times: “I think it is a very important forum, to bring together the experts from banking industry.”



Referring to the sanctions removal, he said: “I think it’s the time to come back to the table.”



“The world has changed since the sanctions were put in place, so there are a lot of technical and other issues we should understand. We should understand what’s going on in Iran and I think you should understand what’s going on in Europe”, he stated.



“We had a huge financial crisis in Europe and since then regulations came in place which are even worse than sanctions, so the world of banking and finance is very different if you come to Europe now, from before the sanctions”, he added.



“There are many opportunities and now it’s the time to take the opportunities. There are regulations in Iran that the German companies should know”, said Michael R. Fausel from Beiten Burkhardt, a commercial law practice founded in Germany and active worldwide.



“The conference shows that Iran is open for business, is keen to reconnect to the global banking and financial system. I think this conference is very positive for Iran and also more importantly very positive for Europe and the rest of world”, said William Breeze, an energy finance expert in Britain’s Herbert Smith Freehills, one of the world’s leading law firms.



“The reason for taking a conservative approach toward cooperating with Iranian banks is that European banks are concern about what America would think. I Think and hope that European banks can seek quite what a large opportunity Iran offers and realize that it’s an opportunity that we take and European banks should reengage as quickly as possible”, he noted.



“The forum is important for passing information, for being able to bring together the global institutions and Iranian institutions, so we understand how we can work closely together”, said Charles Blackmore , the CEO of Britain’s Audere International Ltd.



He said: “European banks are conservative because the primary sanctions are still in place. They have been fined many times by the Americans and they are nervous, they want to know, make sure that who they are working with. When they know who they are working with, then they can upset the American sanctions and they will be more relax about releasing money. But also you got to remember that Iran is one country of the whole world and there are many opportunities for finance, so we must evaluate the risks.”












 

Iran welcomes boosting trade ties with the European Union in a way that European investors could take advantage of unique opportunities in Iran and Iran’s economy could accelerate the process of its growth and development, according to Central Bank of Iran (CBI) Governor Valiollah Seif.



Seif made the remarks in “The 2nd Business and Banking Forum Iran Europe” which kicked off in Tehran on Saturday and will run until Monday.

 

In January world powers led by the United States and the European Union lifted sanctions on Iran which had been imposed over its nuclear program. The subsequent leap in Tehran’s stock market in late January and early February gave a hint of the country’s investment potential.



The lifting of sanctions opens a new chapter of economic development and put the country’s potentialities into practice, Seif added.



The ground is laid for more security of foreign investment in the country and also for more economic sustainability, he maintained.



Iranian economy enjoys great advantages such as educated and expert manpower, huge natural resources, cheap price of energy, big market inside the country and also access to the regional markets, the official highlighted.



“I hereby invite all European investors, service institutes and also banks to take the advantage of unique opportunities created in Iran in the post-sanctions time”, the CBI’s governor stated.



He also said that all Iranian banks are now connected to the SWIFT international payment system.



---- 2016 economic growth above 5 percent



Elsewhere in his remarks, Seif said that Iran’s economy is expected to witness an economic growth of more than five percent in 2016.



“Economic growth slowed down in 2015 but domestic and international predictions both indicate that growth in 2016 would be beyond 5 percent,” he added.



*** European banks should avoid conservatism



Addressing the same forum, Mohammad Khazaei, the Iranian deputy economy minister and also the president of the Organization for Investment, Economic, and Technical Assistance of Iran, said: “Let me be honest with you, I see some conservative approaches from European banks to work with Iranian banks. I would like to make it clear here that conservatism is the big enemy of taking advantages in Iran’s market.”



Banks are the routes of collaboration, transferring money, so any problem in this area of course is a big obstacle in the way of cooperation, the official stated.



He went on to say: ”Because Iranian banking system and Iranian businessmen have been away from their traditional counterparts [during the sanctions times]; therefore we need to get together again and know how the banks can get together and there are many issues that we should solve and then we can also move.”



Elsewhere in his remarks, Khazaei said Iranian government has adopted policies to support foreign investment especially in the fields which bring value added, such as transfer of technology and increase of exports.



He mentioned facilitation of investment making through cutting some administrative and trade barriers as one of the mentioned policies.



Iran will take the same approach toward the foreign investors as that towards the Iranian ones; the official stated, adding: “Based on the law, your investment in banking sector in Iran is protected and guaranteed by the laws, so there is no impediment or problem to work in this area.”



The foreign banks and investors will be granted tax exemption of 20 percent in the mainland and 100 percent in the FTZs of Iran, he announced.



*** ‘New, big opportunities in Iran by sanctions removal’



Matthias Machnig, the state secretary at Germany’s Federal Ministry for Economic Affairs and Energy, was the other speaker in the forum.



He said: “Now by lifting of sanctions there are new and big opportunities. It is very crucial that in these conferences we talk together to build up trust. I hope this conference will build up new relations and we will be able to define projects where we can work together and can build new basis for our economic and political relations.”



“We want your country being a constructive partner, not only in this region, but also in the international level and hopefully we are able to take this opportunity and find new ground for a common work together”, he added.



European and Iranian companies now want to take advantage of the resulting opportunity as quickly as possible, Machnig said; adding there are a lot of opportunities for long-term partnership which can benefit both sides.



*** Views of some foreign participants



One of the participants in the forum, Sonke Reimers, the managing director of Germany’s dfv media group, told the Tehran Times: “I think it is a very important forum, to bring together the experts from banking industry.”



Referring to the sanctions removal, he said: “I think it’s the time to come back to the table.”



“The world has changed since the sanctions were put in place, so there are a lot of technical and other issues we should understand. We should understand what’s going on in Iran and I think you should understand what’s going on in Europe”, he stated.



“We had a huge financial crisis in Europe and since then regulations came in place which are even worse than sanctions, so the world of banking and finance is very different if you come to Europe now, from before the sanctions”, he added.



“There are many opportunities and now it’s the time to take the opportunities. There are regulations in Iran that the German companies should know”, said Michael R. Fausel from Beiten Burkhardt, a commercial law practice founded in Germany and active worldwide.



“The conference shows that Iran is open for business, is keen to reconnect to the global banking and financial system. I think this conference is very positive for Iran and also more importantly very positive for Europe and the rest of world”, said William Breeze, an energy finance expert in Britain’s Herbert Smith Freehills, one of the world’s leading law firms.



“The reason for taking a conservative approach toward cooperating with Iranian banks is that European banks are concern about what America would think. I Think and hope that European banks can seek quite what a large opportunity Iran offers and realize that it’s an opportunity that we take and European banks should reengage as quickly as possible”, he noted.



“The forum is important for passing information, for being able to bring together the global institutions and Iranian institutions, so we understand how we can work closely together”, said Charles Blackmore , the CEO of Britain’s Audere International Ltd.



He said: “European banks are conservative because the primary sanctions are still in place. They have been fined many times by the Americans and they are nervous, they want to know, make sure that who they are working with. When they know who they are working with, then they can upset the American sanctions and they will be more relax about releasing money. But also you got to remember that Iran is one country of the whole world and there are many opportunities for finance, so we must evaluate the risks.”







CAP: Central Bank of Iran Governor Valiollah Seif speaking in “The 2nd Business and Banking Forum Iran Europe” in Tehran on Saturday

   Print Documents


 

Copyright © 1998-2007 The Tehran Times Daily Newspaper, Tehran-Iran All Rights Reserved.Email : This email address is being protected from spambots. You need JavaScript enabled to view it.


 

Turkish PM Ahmet Davutoglu who is in Tehran to meet with Iranian authorities, was received by President Rouhani earlier this evening.

Referring to the two countries as neighbors and brothers with huge cultural and religious commonalities, President Hassan Rouhani asserted that the basis of religious thinking in the two countries is different from some warmongering countries; “today, Islamic unity and solidarity among Muslim nations is a great mission and duty for all and everyone; Tehran and Ankara as two significant neighbors can take effective and constructive steps contributing to establishment of unity in the Muslim world.”

Iranian president reiterated necessity of fight against terrorism which is a threat for all nations. “Other countries from outside the region are not after uprooting problems and merely follow their own interests. Thus, we believe that regional problems must be resolved by countries and nations of the region and there is no doubt Iran and Turkey can have constructive roles in establishing enduring peace in the region.”

“That territorial integrity of countries must be respected, future of any nation must be decided by its own people, war and bloodshed must be stopped and the displaced need care are points the two sides share,” said Mr. Rouhani and continued that “Tehran and Ankara can work together seriously in these areas to work for resolving regional problems.”

Rouhani also said that nations in the region were expecting bilateral and multilateral cooperation among countries in region so that Muslim countries can synergize potentials in order to solve difficulties.

“There are no obstacles ahead of expansion of ties between the two countries and time is ripe for more relations to serve interests of both nations,” Hassan Rouhani said and rejected that some regional problems had affected Tehran-Ankara ties. “The two capitals enjoy high capacities in different areas such as transportation, business, investment, tourism and science and technology for cooperation.”

President Rouhani also called for more active role for bilateral cooperation commissions and expressed hope setting operational measures in future would bring about improvements in relations of two countries.

Turkish PM, for his part, emphasized that Ankara is determined to open a new chapter in its ties with Iran; “today, Turkey, more than any time before, intends to boost its fraternal cooperation with the Islamic Republic of Iran in different areas.”

Ahmet Davutoglu who has come to Iran heading a delegation of investors and businesspeople said “Iran and Turkey complete each other and have high capacities and potentials for development of ties and considerable steps can be taken through joint investments in business and industry.”

Davutoglu also pointed necessity of regional cooperation between Tehran and Ankara in fighting terrorism and stated that “we must work hand in hand in regional problems and stand against barbaric ways of terrorists. Turkey is ready for complete cooperation with Iran in fight against terrorism in the region.”

Turkish PM concluded that his fellow country considers respect for territorial integrity and national sovereignty of other countries as basic principles of its foreign policy.

Iranian and Indian oil ministers are scheduled to meet in coming days in Tehran during which they are going to negotiate cooperation in the development of Farzad-B gas field, crude oil transaction, and investment in the petrochemical industry, said Iran’s deputy petroleum minister for international affairs and commerce.

“Talks on the Farzad-B field are expected to extended for some time, and the Pars Oil and Gas Company will carry out the negotiations about the field,” Amir-Hossein Zamani-Nia said on Monday in an exclusive interview with Shana on the upcoming visit by India’s Petroleum and Natural Gas Minister Dharmendra Pradhan.

Pradhan’s visit, reportedly on April 6 and 7, is the first by an Indian minister following removal of sanctions as India wants more oil imports and shipments of natural gas from Iran.

New Delhi is looking to increase engagement with Iran for the development of Farzad-B gas field in the Persian Gulf that was discovered by India’s ONGC Videsh, the overseas arm of the India’s state-owned Oil and Natural Gas Corporation.

Under pressure from the United States, the OVL-led consortium delayed and ultimately relinquished development of Farzad-B offshore natural gas block. New Delhi also withdrew from the Iran-Pakistan-India pipeline project slated to bring 11.3 bcm meters of Iranian natural gas per year to India.

“A proposal on the undersea pipeline to carry natural gas from Iran to India is also under study by an Indian firm,” the deputy minister added.

Last December, managing director of the National Iranian Gas Export Company (NIGEC) said Tehran and New Delhi are seriously negotiating construction of a trans Oman Sea-Indian Ocean pipeline to transfer gas to the energy hungry India.

“The 4.5-billion pipeline is set to pump 31.5 mcm of Iran’s gas to India’s western Gurjarat port,” Ali-Reza Kameli said on the sidelines of the Fifth World Energy Policy Summit in New Delhi adding that the talks are underway with the pipeline construction company South Asia Gas Enterprise (SAGE) which has the expertise for laying deepwater gas pipelines.

Zamani-Nia also told Shana that Tehran and New Delhi are in talks over payment of India’s outstanding amounts arising from crude oil transactions.

Director general of International Affairs of the National Iranian Oil Company (NIOC) has denied media reports that Tehran has accepted receiving the arrears in Indian rupees. “If NIOC was to receive the unpaid sum in rupees, it would do it earlier,” Mohsen Qamsari told Shana.

The debts have been overdue because of US-led sanctions which barred their transfer to Iran which were lifted in the wake of the nuclear accord with the world powers.

Gas-rich Iran which holds the largest reservoirs of 34 tcm or 18 percent of the global resources has also entered into contracts for export of natural gas to neighboring Turkey, Pakistan, Iraq, and UAE.

Zamani-Nia said that the Indian minister is going to negotiate with Iranian Minister of Petroleum Bijan Zangeneh and meet minister of industry, governor of Central Bank of Iran, and FTZs secretary.

“Pradhan will travel to Chabhahr port to visit the petrochemical site under construction by Indian firms for production of fertilizers before winding up his visit to Iran,” he said.

By Rupert Hargreaves


According to Sturgeon Capital, the firm that started up in December with the goal to invest exclusively in Iran, falling interest rates are the “single biggest catalyst” for an equity market rally in the country.
Iran: One of the most attractive emerging markets?

As reported in the Bloomberg Brief Hedge Fund newsletter, Sturgeon believes that Iran is one of the most attractive emerging markets out there today, and the country’s sky-high interest rates of 21% leave plenty of room for further monetary easing.

Sturgeon Capital Inagural Report On Iran Strategy

Iran’s central bank has become more hawkish in recent months. The country’s inflation rate, which hit a high of 40% in 2013, has fallen to 12.6% in the 12 months ending February 19 and now that sanctions against the country have been lifted inflation should fall further. Interest rates should soon start to reflect this disinflationary trend.

According to Clemente Cappello, founder of the London based Sturgeon:

“We expect them [interest rates] to go down gradually to higher single digits. That should provide a big boost for the stock markets because it means your cost of capital is going down, it means the interest rates you’re getting from bank deposits will be reduced and therefore, it makes the stock market comparatively more attractive.”

To play the falling interest rate trend, Sturgeon is focusing on small-cap, family-owned companies in Iran’s industrial and consumer sectors, which have strong export potential.

A great example is the glass sector. The main cost inputs for Iranian glass companies are labour, energy and sand — all of which are in abundant supply in the country. Other examples of companies the fund is interested in are; a utility company that services the petrochemical sector; an Internet provider, a payment processing company and; a vegetable oil producer.

Now that sanctions against the company have been lifted, Sturgeon’s investment universe has widened from 50 to all 600 companies listed on the Iranian stock exchange – that total excludes four entities controlled by Iran’s Revolutionary Guard Corps.

With Sanctions Gone, Is Iran A Hot Investment Destination?

According to Bloomberg Brief, Greylock Capital Management is also bullish on the outlook for Iran’s stock market as foreign investors and multinationals flock back to the country after last year’s historic nuclear deal.

According to Greylock’s CEO and chairman, Hans Humes, who traveled to Iran in June, the biggest opportunities for investors are Iran’s energy, infrastructure and corporate services markets where investment opportunities may be worth “multiple tens of billions” of dollars in the next five to ten years, assuming political stability.

However, there are risks and some are more skeptical. Recent actions by Iran may give one a reason to be a bit more hesitant from either an ethical and/or realist point of view.

The OMV group, the international, integrated oil and gas company headquartered in Vienna, is negotiating for a long term contract of crude oil with National Iranian Oil Company.

“Iran’s oil export to Austria has kicked off through spot contracts,” said Seyed Mohsen Ghamsari, Executive Director for International Affairs at National Iranian Oil Company (NIOC), when asked about the latest status of Iran-Austria oil trade and the agreements signed with the OMV group, an integrated international oil and gas company headquartered in Austrian capital city of Vienna.

The official announced that so far a cargo of 1 million barrels of crude oil has been delivered to the OMV group and concurrently the talks for signing a long term contract of oil sale to the Austrians are underway.

“No final agreement has been reached yet,” reiterated the board member of the National Iranian Oil Company (NIOC), “hence no volume of oil trade for the long term contract has been agreed upon.”

Two weeks ago, the OMV group announced that the company has received an Iranian cargo of 1 million barrels of crude oil at Italian port of Trieste. 

Iran's oil minister says U.S. companies are welcome to invest in the oil and gas industry
 In this Nov. 17, 2015 file photo, Iranian Oil Minister Bijan Namdar Zanganeh listens to a question during a press conference in Tehran, Iran. State-run Press TV quoted Zanganeh Sunday, March 13, 2016, saying that U.S. companies are welcome to invest in Iran's oil and gas industry. The TV report said Zangeneh also asked the German company Siemens executives to invest in Iran's oil and gas industry. (AP Photo/Vahid Salemi, File)

U.S. companies are welcome to invest in Iran's oil and gas industry, the Iranian oil minister said on Sunday.

State-run Press TV quoted Bijan Namdar Zangeneh as saying that "in general, we have no problem with the presence of American companies in Iran."

He said it is the U.S. government that is "creating restrictions for these companies," without elaborating. Zangeneh also confirmed that Iran's state-run oil company has held talks with General Electric.

"Of course, my deputy conducted these negotiations and when I inquired about them, it was said that the talks were positive," he said.

The TV report said Zangeneh also asked Siemens executives to invest in Iran's oil and gas industry.

"The German company must come to Iran to build equipment and parts needed in our oil industry and manufacture them here," he said.

All sanctions related to Iran's nuclear program were lifted in January under a landmark agreement reached with world powers, but the U.S. maintains separate sanctions related to Iran's ballistic missile program and its support for State Department-designated terrorist groups.

Iran is trying to regain its share of the global petroleum market after the removal of sanctions.

Saudi Arabia, Russia, Venezuela and Qatar floated the idea of a production cap last month with the aim of boosting global oil prices, but it was conditional on other producers joining in. Iran, which is eager to jumpstart its oil industry, has so far resisted.

Zangeneh dismissed the idea of a production freeze by Iran as "a joke", according to the TV report. He said Iran will take part in discussions on a possible oil production freeze after its output reaches 4 million barrels per day.

"As long as we have not reached 4 million bpd in production, they should leave us alone," Zangeneh said.

Copyright 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


  Source:   Associated Press

{jcomments on} 

Iran’s population of over 74 million people composes 1.09% of the world’s population; Iran has the second largest population, after Egypt, in the Middle East and North Africa region

The Islamic Republic of Iran, is a resource-rich and labor-rich country; new mineral wealth is being discovered each year, and a large part of the country is still unexplored:

Ranks seventh in mineral wealth; among the world’s top three holders of proven oil and natural gas reserves; possesses 10% of proven global petroleum reserves with an estimated 137.6 billion barrels of proven oil reserves; possesses about 18% of the earth’s natural-gas deposits, ranks as the world’s second holder of proven gas reserves after Russia with an estimated proven natural gas reserves at 1,045 trillion cubic feet (Tcf),

OPEC’s second-largest producer and exporter after Saudi Arabia

In the soon-to-come era of natural gas dominance over oil, Iran will oust Saudi Arabia as the world’s beating heart for energy
Strategic location, surrounded by 15 land and sea neighbors, can serve as a lucrative trade and transit route in both north-south and east-west directions

Abundant natural and human resources would be magnets for foreign direct investment if a hospitable business climate and sufficient incentives should prevail

Variegated climate and favorable topography allow for a rich agriculture under conducive policies

The minimal infrastructure needed for growth and development (roads, railroads, air and sea ports, modern communications) is already in place to promote and sustain growth under proper maintenance

According to a report published by Goldman Sachs, Iran has the strong possibility of becoming one of the world's largest economies in the 21st century
The country has a young and steadily urbanizing population:
65% of the population is under the age of 30
68% live in urban settings

Iran is the fastest growing country in terms of numbers of scientific publications in the world, growing from just 736 in 1996 to 13,238 in 2008

The Government is committed to a “comprehensive plan for science”, including boosting R&D investment to 4% of GDP by 2030 (it stood at just 0.59% of GDP in 2006)

Considered the region’s most “wired” nation, with more than one-third of its 74 million people having access to the Internet
Health outcomes in Iran have improved greatly over the past twenty years and now generally exceed regional averages; key to this success has been the Government of Iran’s strong commitment to and effective delivery of primary health care

Health outcomes in rural areas are almost equal to those in urban areas, with outcomes in terms of infant and maternal mortality nearly identical between urban and rural areas.

Among 169 countries, the Islamic Republic of Iran has been ranked 70th in terms of Human Development Index (HDI) according to the United Nations' report on 2010 Human Development Index (HDI)

by Iain MacGillivray

Chris Parker, MBE, is the CEO of Iran Business Hub, a London-registered, international, British and Iranian partnership that specializes in large corporate entry into Iran. The Iran Business Hub provides confidential advisory, strategic planning and operational services. Mr. Parker sat down with GRI to discuss Iran’s re-entry into the global economy and the future of economic investment in Iran.
“Not a question of how economic engagement will happen but when”

GRI: With Iran’s re-entry into the global economy and the possibility of economic opportunities for trade and foreign capital, what do you see is the future for Iran regarding economic investment? What does Iran offer for future investors?

Chris Parker: I was just talking to former deputy governor of the Central Bank of Iran (CBI) – Kamal Seyed Ali, who aptly pointed out that “Iran is in a period of transformation.” What this statement means is that there is a sense that there is great momentum building up and an enormous appetite from western businesses and their Iranian counterparts to engage with each other. Essentially, both the private sector and the Iranian government are so to speak ‘moving out onto the dance floor’ regarding economic engagement. They are unsure of how to ‘dance with each other’, but the motivation is there.

However, there is a significant gap in information on how to facilitate this. Despite the appetite from international credit organizations, national banks and sovereign wealth funds, there needs to be patience and clarity before real economic engagement occurs. Notwithstanding this gap in information, there is support from all sides in making sure that this change and tempo continues. The necessary international frameworks and regulations are being established as we speak to facilitate these processes, but EU and US financial institutions need to help promote this further.

However, we must remember the significance of how big the potential market is in Iran. It is a consumer-driven market, which has been short of branded and luxury goods for some time and this presents an opportunity for importing and rebuilding consumer confidence in these areas. Of course external influences such as the continuing OFAC sanctions and regional instability will drive uncertainty in these relations, but the unstoppable momentum and interest that is there between the private sector and the Iranian government can only bring round positive outcomes. It is not so much a question of how this economic engagement will happen but when.
The potential of ‘soft infrastructure’

GRI: What future investment do you see for the Iranian oil and aviation industry? What other industries do you see substantial growth in and the potential for foreign capital investment?

Chris Parker:  The Iranian oil industry is in need of substantial investment. Some International Oil Companies (IOC’s), as well as their shareholders, will want to help Iran back onto its feet in re-entering the hydrocarbon market. Iran has the potential to dominate the oil sector and it is a growth economy. Regarding the aviation industry, growth is moving at a rapid pace and is fastest in terms of domestic aviation.

Besides this let’s not forget that it is far easier in Iran to invest large amounts of capital compared with other Middle Eastern countries. Iran is a signatory to The New York Arbitration Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958. This allows transparency and significantly reduces political risk, as there is a final court of arbitration and court-enforced decisions if anything does go wrong. However, all such legal frameworks, of course, remain recently untested. Iran presents a safe place to invest large amounts of capital investment, therefore the drive for international investment in these primary industries.

In terms of other sectors as I mentioned previously, consumer goods will be one of the most major areas for investment and economic opportunities in Iran. However, what is also needed (and I can see exponential growth in), is ‘soft infrastructure’ such as in traffic control operation procedures, railway systems, and integrated logistics. Iran has a very well-educated population and the drive for innovation and design in population’s centres will see the potential for technological investment as well.

Don’t forget that visas into Iran are easier to obtain now, and it will become a very attractive international tourist destination especially in the north of Iran. There is no significant resort-based tourism yet but with ski-fields and scenery that is second to none, International tourism is on the up and up and will no longer be exclusively for adventure travellers. However, despite international investment, it must be made clear that Iran will dictate its own growth with the help of these international and regional companies.
“Iran can and will become a new trading hub”

GRI: What possibilities does Iran’s re-emergence in the global economy present for regional economic prospects?

Chris Parker: Iran is an island of stability in an ever uncertain and unstable region. It has the required institutional processes and security needed to provide a stable political and economic environment. This is why there is this thirst to invest because there is the potential as well as a secure environment for business.

Concerning regional integration, the political rapprochement and lifting of sanctions has also seen Iran play a potentially larger role in the region. The economies in the GCC are in trouble due to the drop in the price of oil and the social tensions that are caused by this. Iran, however, has opened its doors to investment from regional players and vice-versa. It is easy to obtain a visa for business purposes as Iran seeks to play a wider part in the economic integration of the region. Despite the political situation in the Middle East, there is an excellent opportunity for economic integration with other Gulf States as is demonstrated by Iran’s relationship with Oman. Iran can and will become a new trading hub just like Dubai.  
The need for a robust regulation model

GRI: Which countries are most interested in investing in Iran? Do you see potential investment from international economic players such as the United States and other developing powers?

Chris Parker:  In terms of investment and finance, there are still many primary sanctions holding back companies from investing in all sectors such as banking. Leading the way however is Turkey, who sees the opening up of the Iranian economy as an enormous opportunity. Turkey will dominate in terms of hard infrastructure, such as in construction industry due to its regional proximity and expertise. On the other hand, the EU and the UK will lead the way in ‘soft infrastructure,’ which I mentioned previously. Most of these investments will take the form of Joint Ventures that will develop not only these industries but also provide essential expertise.

Iran, however, needs to work out a robust regulation model – whether it follows the path of Dubai in terms of high standards or follows the quick build model with a lesser standard. However, this decision will be crucial if Iran wishes to attract and establish solid business investment.

Iran has now attained an unstoppable momentum. It is this rate of change that we need to observe and watch. For us in the business world, this tempo and rate of change must also come hand in hand with quality, safe infrastructure, and regulatory development. It must also be linked to political assistance from the international community and international business sector. The possibilities for the future are endless, but Iran cannot do this on its own.

Chris Parker, MBE, is the CEO of Iran Business Hub. He is also Chairman of Charmogen Group, an international consultancy network, and he was previously Chief Operating Officer for a major oil & gas exploration company. He has also been an Operations Director with Hyder plc in London, and was Project Director for the successful $1.3B Burj Dubai infrastructure mega-project in the UAE. Chris has served on UK and NL Government Trade Missions to the MENA region and frequently speaks at international trade conferences and comments live on Sky News and international media. Chris has a Master’s Degree in Technology and is a Chartered Manager and Fellow of the CMI.

keywords:Iran,Investment

Source:Global Risk Insights

Head of Monetary and Banking Research Institute (MBRI) said opening branches of Iranian and European banks had been placed on the agenda.

Speaking at the 4th Iran-Europe Trade and Banking Conference in the IRIB International Hall, Ali Divandari said the event mainly seeks to review process of reforms in Iran’s banking system in order to speed up connections to the international system.

In the meantime, issues like future of the industry, launch of Iranian banks in Europe and meeting international standards will be surveyed by experts during the two-day conference.

MBRI managing director described Europe as the second largest trade partner of Iran after Asia and expressed optimism that the event will prove effective in facilitating trade and banking relations between the two sides.

He noted that MBRI, as the research arm of the Central Bank of Iran (CBI), had put on the agenda serious measures to reconnect Iran’s banking system to the global one as a means of paving the path for expansion of trade and banking ties.

“Investment opportunities in Iran, especially in infrastructure and energy sectors, will be introduced to foreign guests of the conference,” Divandari underscored.

He reiterated that compliance to international rules and regulations and combating money laundering were major prerequisites to reconnection of Iran to the International banking system.

The Monetary and Banking Research Institute is holding the 4th Iran-Europe Trade and Banking Conference in the IRIB International Hall on 29-30 April 2017.

The main objectives of the conference include the exchange of ideas between various scholars and specialists from different economic fields; active participation of reputable domestic and foreign firms; holding of multilateral meetings between European individuals, companies and institutions and their Iranian counterparts; provision of a platform for meeting potential customers and trade partners; building private and personal communication networks; and also introduction of various products and services.

Iran is poised to build new oil refineries and petrochemical plants, now that it has been freed from international sanctions. Experts warn that investing in the Middle Eastern country is still risky, in part due to sectarian tensions with neighbors such as Saudi Arabia. Yet companies are leery of another risk, too -- missing out on huge opportunities.

Yoshihiro Shigehisa

     JGC, Japan's leading plant builder, is one company looking at ways to capitalize on this potentially lucrative market. The Nikkei spoke with Yoshihiro Shigehisa, JGC group's chairman emeritus, about the business outlook in Iran.

Q: What are your expectations for post-sanctions Iran?

A: This is an opportunity to tap a big, promising market. Iran has one of the largest populations in the Middle East, with nearly 80 million people. It has said it will raise its crude oil output in two stages, by 1 million barrels a day. We pulled our employees out of the country because of the sanctions, but we plan to station one or two in Tehran by spring. We expect growing demand for plants, and we hope to strike some deals by the end of this year.

     There are opportunities for other Japanese businesses, not just ours. Due to the sanctions, the government has limited funds for new projects. For large endeavors, Tehran will seek to secure loans or work out other financial arrangements with its partners.

Q: Are you interested in other fields of business in Iran, besides the resource sector?

A: We want to invest in ways that will help the country to develop. Nothing has been decided yet, but we may consider investing in hospitals and agriculture, along with power plants.

Q: Earlier this year, Saudi Arabia cut diplomatic ties with Iran. Are you worried about the deepening religious conflict?

A: My sense is that the bilateral relationship will not deteriorate further. Falling crude oil prices are hitting both economies. They should be aware that this is not the time for them to confront each other.

     But it is also true that we should be cautious when making deals with Iran, to avoid compromising our relationship with Saudi Arabia. I recently visited a Saudi customer I have known for years. Although this customer might not welcome us doing business with Iran, the impression I got was that they would accept it. 

The Law on foreign investment in Iran under the name of “Foreign Investment Promotion and Protection Act” (FIPPA) was ratified by the parliament in 2002.

Some specific enhancements introduced by FIPPA for foreign investment in Iran can be outlined as follows:
1-Broader fields for involvement by foreign investors including in major infrastructure,
2-Broader definition given to foreign investment, covering all types of investments from FDI to different types of project financing methods including :Civil Participation, Buy –Back arrangements, Counter trade and various BOT schemes;
3-Streamlined and fast track investment licensing application and approval process;
4-Creation of a one stop shop called the “Center for foreign investment Services” at the organization for investment for focused and efficient support for foreign investment undertaking in Iran,
5-More flexibility and facilitated regulatory practices for the access of foreign investors to foreign exchange for capital transfer purpose

Law on Foreign Investment Promotion and Protection Act (English)

Application form to enjoy Foreign Investment and protection act in Iran  (FIPPA)

If you need Free Investment consultancy on investing in Iran Special Economic Zones please send your questions  to: This email address is being protected from spambots. You need JavaScript enabled to view it.  

Effective project management is a cornerstone of success in the construction industry. Whether you are building an accessory dwelling unit or a towering skyscraper, the journey from design to realization demands meticulous planning, seamless coordination and unwavering commitment to quality and safety.

Construction project management, often referred to as CPM, involves the meticulous planning, coordinating, and supervising of every facet of a construction project. The ultimate aim is successful completion while adhering to predetermined scope, budget, schedule, and quality parameters. CPM involves bringing together various resources, including labor, materials, equipment and technology, while managing diverse stakeholders, such as clients, architects, engineers, contractors and regulatory authorities to deliver a completed project.

In this article, we delve into the essentials of construction project management (or CPM), unraveling the key strategies that drive projects to completion on time, within budget, and to the highest standards.

Table of contents

The Construction Project Management Process
1. Initiation
2. Planning
3. Execution
4. Monitoring & Project Control
5. Project Closeout
Roles and Responsibilities of a Construction Project Management Team
Project Manager
Construction Manager
Contract Administrator
Superintendent
Bidding
Bidding Process
1. Bid Solicitation
2. Bid Submission
3. Bid Selection
4. Contract Formation
5. Project Delivery
Different Types of Bids
Construction Management Contracts
Lump Sum Contracts
GMP Contracts
Cost-Plus Contracts
Unit Price Contracts
Time & Materials contracts
Construction Project Management Tools
Project Management Software
Building Information Modeling
Drones and Virtual Reality
Process Automation and Artificial Intelligence
The Construction Project Management Process
Let’s explore the process of construction project management and the different phases involved.

Infographic displaying the 5 phases of construction project management
1. Initiation
The initiation phases lays the foundation for the entire project. In this predevelopment phase, the project scope is defined and key stakeholders are identified including the architect, engineers and consultants, contractors, and regulatory authorities. The focus is on defining project goals, establishing a preliminary budget, and creating a comprehensive project understanding.

Engaging in due diligence, the project owner often conducts a feasibility study. This analysis examines the project's viability and assesses potential challenges such as regulatory requirements, budget considerations, and site limitations. The feasibility study either persuades the owner that the project is viable, raises concerns that require adjustments before proceeding or indicates that the project is a no-go.

Following a feasibility study, the project owner will select the architecture and engineering team. This kicks off the preconstruction stage.

This phase usually also includes the design stage of a project. Architects, engineers and other specialty subconsultants collaborate to transform the owner’s ideas into blueprints and specifications. Every detail, from structural integrity to aesthetic appeal, is considered and incorporated into the design plans.

2. Planning
A detailed project plan is crafted during the planning phase, usually led by the project manager. This plan provides a comprehensive outline of all tasks, milestones and timelines necessary to deliver the project. Resources, such as labor, materials, equipment, and funds are allocated to different phases of the project schedule.

The team identifies and assesses potential risks and mitigation strategies, and establishes quality standards and safety procedures. The project manager evaluates the entire project and strategically devises a plan of action to ensure seamless project execution. This also involves selecting the project delivery method that best aligns with the project goals and objectives.

The project manager and owner will then begin the process of selecting the team responsible for building or construction. The bidding process varies based on factors such as project delivery method, contract type, and project objectives. After the owner chooses the general contractor or construction manager and the contract is finalized, the preconstruction phase begins.

During preconstruction, the CM or GC lays the groundwork for the construction project, ensuring that all necessary preparations are made before physical construction work begins.

The contractor collaborates with the architecture and engineering teams to assess the constructability of the design and begins the process of securing any essential permits or regulatory approvals. Furthermore, the contractor develops a comprehensive cost assessment encompassing all aspects of the project, such as construction, materials, labor, and any contingencies.

Once the budget is established, the contractor identifies resources, materials, and services, shaping a procurement strategy that involves assessing potential subcontractors and suppliers. Based on the project’s goals and objectives, the contractor evaluates and selects subcontractor partners, subsequently engaging in contract negotiations with them.

During preconstruction, the contractor also creates a comprehensive project schedule outlining activities, milestones, and critical paths. This includes establishing specific timelines for key activities such as design reviews, permitting, procurement, and the various phases of construction. Throughout this stage, the contractor actively engages with the client, updating them about project progress, design decisions, and cost implications as well as integrating any feedback into the project plan as required.

Formulating a well-structured and detailed plan provides the project team with a roadmap that guides the execution phase, helping them stay on track, avoid obstacles, and deliver the project within the established parameters.

Make it easier to manage construction.
Illustration showing framers assembling a wooden wall
3. Execution
During the execution phase, the actual construction work takes place based on the plans, designs, and schedules developed in the planning phase. This phase involves coordinating and overseeing various activities to ensure that the project progresses according to the established timeline, budget, quality standards and agreed-upon scope.

This marks the official start of construction. The construction team — including labor, subcontractors, and suppliers — carries out its assigned tasks or scopes of work according to the established project plan. On-site management, usually the superintendent, oversees all work and ensures that it is executed safely, efficiently, and in compliance with regulations and design specifications.

The project manager (PM) of the contractor and the owner’s representative closely monitor work progress against the project schedule and budget. The PM maintains close communication with all project parties, including the client, subcontractors, suppliers and regulatory authorities regarding the project’s status. This continuous monitoring enables them to promptly address any potential deviations, ensuring that the project stays on course.

Simultaneously, resource management continues to remain essential for project delivery. The careful coordination of labor, materials, equipment and subcontractors is meticulously managed to maintain a seamless workflow and prevent any shortages or bottlenecks that might impede the project moving forward.

As construction progresses, the contractor addresses any design changes, scope modifications, or unforeseen circumstances that arise and necessitate adjustments to the project plan. The contractor evaluates the impact of these changes on schedule, budget, and overall project objectives. This evaluation guides the formulation of a strategic path forward, preserving project integrity despite these shifts. Open lines of communication ensure that the project owner is promptly apprised of these developments, facilitating informed decisions and collaborative solutions.

During construction, the contractor continuously manages and reallocates resources, including labor, material, equipment and subcontractors depending on changes to the project plan.

Coordinated efforts, clear communication, and adaptability are all key to ensuring that the project's execution aligns seamlessly with its original vision. The execution phase is a testament to the intricate planning that preceded it, showcasing how the combination of dedicated teamwork and vigilant oversight transforms blueprints into tangible reality. It also paves the way for the subsequent phases, laying the groundwork for successful project completion.

4. Monitoring & Project Control
Overlapping with the execution phase, monitoring and project control continues to focus on overseeing, adjusting, and managing the ongoing construction work.

The project manager, as well as all stakeholders, continue to closely monitor work progress against the established project schedule and budget. This involves comparing the actual work completed against the planned work as outlined in the project schedule. Progress is tracked in terms of tasks completed, milestones achieved, and critical paths. Any updates and changes are communicated to all project parties, keeping them informed about the project's status.

In addition to overseeing the schedule, financial management is a key aspect of this phase. To ensure the project stays within its allocated budget, all actual expenses are tracked against the budget. The project manager continuously analyzes costs incurred, making adjustments if necessary to prevent budget overruns.

Leveraging web-based construction software can be a highly effective tool for the meticulous management of project costs and the seamless tracking of project progress. This innovative technology can help empower construction teams to efficiently monitor and control financial expenditures while simultaneously gaining real-time insights into the evolution of the project.

Another piece of this stage is documentation, which involves the systematic recording, organizing, and archiving of various project-related information, activities, decisions and changes. Proper documentation serves as a comprehensive record for all project parties that facilitate effective communication, analysis and accountability. It also serves as a valuable tool for future reference in case disputes arise and for analyzing lessons learned from the project's execution.

Inspections and quality control procedures serve to evaluate the work completed against the planned work to identify any deviations or discrepancies. This evaluation examines completed segments of works to ensure they align with the project's design specifications, quality standards, and safety requirements.

5. Project Closeout
Project closeout is the final phase of the construction lifecycle. This entails wrapping up all construction activities, completing any final tasks, and formally closing out the project.

Before formally closing the project, the construction team conducts a final inspection to ensure that all work has been completed according to the approved plans, specifications, and quality standards. At this time, any remaining issues or deficiencies outlined on the punch list are addressed and resolved. The contractor also obtains any necessary final approvals from regulatory authorities to ensure safe occupancy of the space.

The completed project is then presented to the project owner for approval. Once the client approves of the project and it aligns with their expectations, the contractor closes all contracts with subcontractors and suppliers and compiles all project documentation, including drawings, permits, warranties, and records, for the client. All final payments are released to the contractor, subcontractor and suppliers including any retainage.

Following project closeout, the contractor may be required to address any post-construction issues, such as defects or warranty claims, contingent on the terms outlined in the contract. Beyond these considerations, the final and crucial element in construction project management entails evaluating the project successes and lessons learned that can be applied to future projects.

As part of this process, conducting a formal review with all project stakeholders to gather feedback and identify areas for improvement is critical. The insights gleaned from this form the foundation upon which future projects are built, turning each subsequent endeavor into an opportunity to continue to advance a firm’s project management expertise and enhance efficiency.

Quality & Safety
Stay Ahead & Leave Risk Behind
Manage, baseline, and improve your quality and safety program from your desktop and mobile devices.

Illustration of construction professional surrounded by circle of charts on screens
Roles and Responsibilities of a Construction Project Management Team
Here are some common and key roles on a construction project management team, along with their responsibilities and the relationship between each.

Project Manager
The project manager, sometimes referred to as an owner’s representative, is the overall leader and coordinator of the project. They are responsible for the project in its entirety: planning, executing, and closing out the project successfully. Their duties include setting project goals, formulating a project plan, managing resources, monitoring progress, and ensuring that the project is completed on time and within budget.

The project manager’s primary responsibility is advocating the owner's interests and ensuring that project teams and vendors fulfill those interests and requirements. In addition, the project manager is also responsible for selecting the project team including the contractor and architect.

The project manager oversees all project stakeholders and team members to ensure the seamless execution of the project, including coordination with design, engineering, and construction teams. The project owner relies on the project manager to ensure the final project outcome aligns with their expectations.

A project manager often refers to both individual professionals or firms. Owners frequently engage project management firms to efficiently oversee the entire project delivery process. Moreover, construction management firms and general contractors commonly enlist project managers to effectively manage and supervise the construction of specific projects.

Construction Manager
The construction manager (CM) oversees the entire construction process, from groundbreaking to project closeout. The CM is entrusted with translating plans and specifications into tangible end products. They coordinate all aspects of construction, including scheduling, resource allocation, cost management, and risk mitigation.

The CM ensures that the project is executed seamlessly, adhering to quality and safety standards. Collaborating closely with the project manager, the construction manager keeps them informed on construction progress as well as any issues that arise. The CM also oversees the superintendent and ensures that construction activities align with the project's overall goals and plans.

In contrast to the project manager, the construction manager's role is confined to overseeing the construction phase of the project, whereas the project manager holds responsibility for all project facets. However, similarly, the construction manager can be an individual professional or a firm that provides construction management services.

Contract Administrator
The contract administrator manages the contractual aspects of the project. They handle procurement, review and negotiate contracts, and ensure that all parties involved comply with contractual obligations. They track changes, claims, and variations to the contract.

Frequently, a project owner will hire a contract administrator to collaborate with the project manager, construction manager, and legal teams to help ensure that contracts are accurately executed. In addition, a construction manager may also hire a contract administrator to ensure subcontractors, suppliers, and vendors maintain a clear understanding of contract terms and conditions.

Superintendent
The superintendent manages and oversees all on-site construction activities, ensuring execution is carried out efficiently, safely, and according to the project plan. Their duties include overseeing daily operations, managing subcontractors, ensuring safety compliance, and monitoring work quality.

In addition, the superintendent serves as the main point of contact for all on-site project members including subcontractors, labor, and suppliers. The superintendent’s primary focus is executing all construction activities and delivering the project according to the approved plans and specifications.

In their day-to-day, the superintendent works closely with the construction manager, project manager, and subcontractors. The superintendent shares insights, updates, and concerns, ensuring that everyone is on the same page regarding project status, challenges, and adjustments.

Regular meetings or check-ins allow the superintendent to provide real-time updates on site progress, discuss any unforeseen issues, and seek solutions collaboratively. This interaction enables the project manager and construction manager to make informed decisions aligning with the project's objectives.

Serving as an effective liaison with various trades and specialty contractors is another pivotal piece of the superintendent’s role. They provide regular updates on site progress to the project manager and coordinate with various trades to maintain efficient construction operations. Subcontractors contribute their expertise to specific aspects or scopes of the project, and the superintendent ensures that resources are allocated efficiently and sequences tasks to avoid bottlenecks or downtime.

Additionally, the superintendent ensures that subcontractors adhere to project specifications, quality standards, and safety protocols to foster a cohesive and productive working environment.

Bidding
Bidding is a crucial part of construction project management that involves soliciting competitive proposals from contractors and suppliers for the execution of a construction project. The primary goal of the bidding process is to select the most qualified and cost-effective bidder, or contractor, to carry out the project.

Bidding Process
The construction bidding process involves several key steps:

1. Bid Solicitation
Bid solicitation occurs when a project owner or general contractor formally requests bids from potential contractors for a specific construction project, typically either through a request for proposal (RFP) or invitation to bid (ITB).

Sometimes bid solicitors pre-qualify a shortlist of contractors through a request for qualifications (RFQ). Subsequently, when bids are required for a particular project, the solicitor draws from this roster of pre-qualified contractors that have already been vetted.

The bid package provides detailed project information, including scope, plans and specifications, project delivery method, contract type and bonding and insurance requirements, to interested contractors. This step initiates the construction bidding process and allows contractors to prepare and submit their competitive proposals for consideration.

2. Bid Submission
After receiving the bid solicitation, the contractor thoroughly reviews the package and assesses the scope and complexity to determine if it aligns with their capabilities. The contractor then uses the information about the project requirements to estimate the project costs, including labor, materials, equipment, overhead and profit margin.

Once prepared, bids are sealed and submitted by a specified deadline, often accompanied by bid bonds or other necessary documentation, to compete for the project contract.

3. Bid Selection
The project owner or general contractor then evaluates the submitted bids based on predetermined criteria to identify the most suitable contractor for the construction project. These factors often include bid pricing, contractor qualifications, experience, and project approach.

For public projects, government regulations typically require that the lowest, most qualified bid is selected. The chosen bid usually reflects a balanced decision that considers both technical expertise and financial viability. A private developer often selects the bid that best aligns with their project parameters and objectives.

Due to the wide range of formats, how costs are calculated and scopes assessed involved in bid submission, the bid solicitor usually engages in bid leveling, also known as bid analysis or bid comparison, to evaluate the bids. This process entails standardizing bids by adjusting cost elements, such as clarifying assumptions or normalizing quantities, to create a more accurate basis for comparing bids while minimizing potential biases in pricing discrepancies.

4. Contract Formation
After selection, the project owner and the winning contractor negotiate any final contract terms and conditions, if necessary. Once both parties agree, they sign the contract, which formalizes the agreement.

5. Project Delivery
Upon contract signing, the contractor begins the construction phase according to the project schedule and specifications. This is the implementation phase where the contractor undertakes the actual construction work as outlined in the contract. Project execution involves managing resources, coordinating labor, adhering to schedules, controlling costs and ensuring compliance with specifications and standards to successfully deliver the project.

Different Types of Bids
There are three different types of bidding, or tendering, that are most common in construction:

Open bidding: Bids are publicly advertised and open to all interested contractors. This is often used on public projects to promote competition.
Selective bidding: Bidding is only open to a select number of contractors who are invited to submit their bids for a project. This is more common on private projects which may require a greater degree of construction management or specialty trade knowledge and skills. Contractors receive invitations based on their existing relationship with the client, past project performance, or their proficiency in a specific project type.
Negotiated bidding: A project owner or GC engages in direct negotiations with a single bidder to establish the ultimate price and contractual terms and conditions. In this case, the buyer already has a preferred choice, which is often driven by the specialized nature of the work.
Bidding plays a pivotal role in construction project management by facilitating a competitive selection process that ensures the best combination of cost, quality, and expertise for the successful completion of a construction project.

Construction Management Contracts
Contract management plays a crucial role in the realm of construction project management. This entails tasks such as negotiating and overseeing contracts and guaranteeing that all involved parties comprehensively grasp their respective roles, responsibilities, and commitments. Within the scope of construction management, contracts are established with project owners and extend to encompass suppliers and subcontractors.

Depending on the project scope, complexity and goals, different construction contracts are used to manage risks and priorities. Fully grasping and assessing the strengths and weaknesses of each contract type is essential for effectively laying the groundwork for a project's success.

Lump Sum Contracts
Lump sum contracts — or fixed price contracts — set a fixed price that accounts for all costs required to complete the work, including labor, materials, overhead and profit. This contract type is often used on projects with a clear and well-defined scope of work. The contractor bears the responsibility for completing the project within the agreed-upon budget and timeline.

GMP Contracts
A guaranteed maximum price (GMP) contract establishes a maximum price for which the contractor agrees to complete the construction project. If the project exceeds that price, the contractor absorbs those cost overruns. Similar to lump sum contracts, GMP contracts mitigate an owner’s financial exposure by setting a cap on the project costs.

This contractual arrangement is predominantly used on larger, more complex projects in which the owner seeks the contractor's expertise and experience in the early stages of project development.

Cost-Plus Contracts
In a cost-plus contract, the owner reimburses the contractor for the actual costs incurred during the project, including labor, materials, and overhead, plus an agreed-upon fee or markup. Negotiating a cost-plus contract is frequently simpler and doesn't necessitate a comprehensive scope, enabling project owners to engage a contractor and initiate construction swiftly. Contractors, in turn, face reduced risk since they’re essentially ensured profitability regardless of project costs.

Unit Price Contracts
Under a unit price contract, the owner compensates the contractor for each distinct work segment, or unit. Unlike lump sum and GMP contracts, this type of contract determines costs by calculating the expenses for each specific work unit, rather than a set fee for the entire project.

In essence, a unit price contract sets the cost of individual work portions or segments. Unit price contracts are typically established in situations where the project's scope or duration lacks clarity and involves repetitive elements.

Time & Materials contracts
A time and materials contract, or T&M contract, is an agreement where contractors receive compensation for the materials employed and the hours billed on a project, accompanied by a negotiated markup. On projects with an uncertain scope, a T&M contract provides owners with the flexibility to adapt to any unforeseen circumstances that arise.

Project Management
Build Predictability and Productivity
Deliver projects on time and on budget with greater visibility.

Illustration of graphs layered into a building.
Construction Project Management Tools
Guiding a construction project from blueprints to reality requires not only expertise in architectural design, engineering, and construction best practices, but also the finesse of efficient project management. In an industry where timelines, budgets, and collaboration are paramount, the art of construction project management tools has emerged as a crucial factor in determining the success of large and small projects.

Integrating digital tools and software into the construction industry has helped revolutionize how projects are planned, executed, and ultimately brought to fruition. In this section, we'll delve into some of these construction project management tools, exploring their functionalities, benefits, and increasingly pivotal role in the construction landscape.

Project Management Software
Project management software tools offer a single source of truth for planning, executing, and monitoring every aspect of a construction project. Put simply, project management software brings order to complexity which is key to efficiently and effectively executing construction projects.

Project management software tools allow for:

Efficient planning and schedule: Project management software allows for detailed project planning, task assignment, and scheduling. This helps in creating a roadmap for the entire project, ensuring that tasks are completed in the correct sequence to avoid delays and inefficiencies. Moreover, in the face of evolving conditions or unforeseen challenges, contractors are able to swiftly adapt, seamlessly integrating changes into the project's overall schedule and progression.
Document management: Construction projects generate an extensive amount of documentation. Project management tools organize these documents in a structured manner, with version control features to ensure that everyone is working with the latest, most up-to-date iterations.
Resource management: Working hand-in-hand with schedule management, project management software empowers contractors to allocate resources with precision. This allocation optimization is achieved by providing insights into labor, equipment, and material requirements, helping effectively curb excessive allocation or underutilization while optimizing resources.
Budget and cost management: Today’s digital financial tools not only allow for management of budgets, changes and SOVs, but also provide insights into tools like forecasting and advanced customized reporting. This data can be used to invoice the project owner accurately or to help streamline subcontractor payments.
Real-time communication: Other features of these platforms include messaging, notifications, and discussion boards to facilitate seamless collaboration and keep stakeholders informed about project progress. By shifting the ball-in-court those up to bat with project data are always kept in the loop about their project responsibilities so that all stakeholders stay informed with easy access to the most up-to-date information.
Building Information Modeling
The integration of Building Information Modeling, or BIM, is a key piece of the construction project management process that involves creating and managing a digital representation throughout the entire lifecycle of a construction project, from conceptual design to operation and maintenance.

The creation of 3D models using BIM provides a visual representation of the entire building's design and layout, aiding in better project planning and decision-making. Project managers and superintendents can use BIM software for clash detection – for example, identifying conflicts in walls or in the plenum space above the ceiling before MEP or other trades manufacture their products.

Screencapture from Procore's BIM software in use.
BIM models also provide detailed information regarding materials, components and quantities. Contractors utilize this information to generate precise quantity takeoffs, a critical step for estimating costs, creating budgets, and planning procurement activities. BIM also facilitates increased collaboration between members of the project team including architects, engineers, contractors, subcontractors, suppliers and clients.

Drones and Virtual Reality
Drones can help swiftly capture site data, monitor progress through aerial imagery, enhance safety by inspecting hazardous areas, and provide valuable real-time insights for better decision-making. This streamlines site surveys and analyses, improves communication, and facilitates accurate quantity estimation, making drones a new indispensable tool for modern construction projects.

Virtual reality (VR) offers immersive experiences and allows stakeholders to visual designs in realistic 3D environments. This fosters improved communication and active involvement from clients, enabling everyone to gain a comprehensive grasp of the final space and collaborate seamlessly during decision-making. The integration of VR into the project management workflow contributes to elevating the overall quality of the end product.

Process Automation and Artificial Intelligence
The improvement and growth of AI (Artificial Intelligence) and process automation are ushering in a transformative era for construction project management. Through the analysis of large volumes of project data, AI provides actionable insights that guide decision-making, resource allocation, and risk assessment.

https://www.procore.com/library/construction-project-management

Predictive analytics also enable project managers to foresee potential issues, such as delays or cost overruns, and take proactive measures to address them. AI can help adjust project schedules to adapt to changing conditions — optimizing project timelines, minimizing disruptions and maximizing productivity. In addition, AI-quality control sensors are able to monitor construction progress and minimize deviations from standards.

Process automation is strealiming routine tasks and communications alleviating this massive administrative burden often associated with construction project management. Automation eliminates manual data entry, which can reduce errors and free up project managers to focus on strategic planning. Using automated notifications and updates keeps stakeholders informed in real time, enhancing collaboration and reducing communication delays.

AI and process automation can empower construction teams with timely insights, efficient workflows, and improved decision-making capabilities to help optimize resource utilization, reduce project risks, and enhance overall project outcomes.

Incorporating these technological advancements not only could enhance project efficiency but also can foster a culture of innovation within the construction industry. As technologies continue to evolve, construction teams are better equipped to navigate complexities that arise, enhance collaboration, and achieve project success. Embracing these tools paves the way for a more agile, data-driven, and resilient approach to construction project management.

CATEGORIES:

BUSINESS MANAGEMENT, PROJECT EXECUTION

Fast growing capital markets group BlueMount Capital has welcomed Melbourne-based corporate advisory and investment banking firm Kennedy Needham to the BlueMount Capital Group, establishing a presence in Melbourne to complement its Sydney, Brisbane, Perth and Shanghai offices. As part of the merger, Kennedy Needham will rebrand as BlueMount Capital.

The Chairman of BlueMount Capital Dr Saliba Sassine said: “On behalf of the whole BlueMount Group, I take this opportunity to welcome Kennedy Needham into our Group and we look forward to driving our business nationally and internationally with the Melbourne office.”

Brent Needham, the executive Chairman of Kennedy Needham said “BlueMount Capital’s new combined offering will provide our clients with a stronger national presence and a global reach which Kennedy Needham could not go past.”

Co-Founder of BlueMount Capital, Mr Barry Palte, said the firm was attracted to Kennedy Needham because of its respected team of professionals, established relationships, 30 year successful transaction history and Melbourne base. Furthermore, the expanded network creates a major new player which is unique within Australia.

BlueMount Capital is the exclusive Australian member firm of the International Association of Investment Bankers (IAIB www.iaib.org), an international affiliation of investment banks.

Barry Palte, who is also global co-Chairman of IAIB, said: “The combined Group will be able to draw on a truly national and international network to deliver globally relevant solutions to its clients. With 10 IAIB member firms in North America, Europe, Asia and Australia, and current new member discussions in China, Japan, Korea and Brazil, our exclusive IAIB membership enables BlueMount Capital as a mid-sized national firm to provide agility and capability while offering genuine global reach and service to our clients.

“Melbourne plays an increasingly important role in a number of cross-border transactions we are working on and we needed the right partner to strengthen our leading market position. With this merger, BlueMount Capital will be able to offer Victorian businesses and investors more services, a stronger national presence, a truly global network and the rich experience of more than 40 experienced professionals operating in both Australia and China.”

BlueMount Capital was established in 2010 with Australian offices in Brisbane, Perth and Sydney. The Group has recently advised on transactions worth more than $1 billion. This includes China Dairy Corporation’s $300 million market capitalisation IPO; the sale of PinkBerry, one of the leading frozen yoghurt store chains in the world, together with a US based IAIB member; and the $69 million market capitalisation IPO of Boyuan, the first Chinese property developer to list on the Australian Stock Exchange. BlueMount Capital also advised one of China’s largest groups on its bids for State Super Financial Services and Greenstone Group, both of which had enterprise values in excess of $1billion.

Kennedy Needham is currently undertaking an equity raising of up to $200 million for Dairy Farm Investments. The firm recently acted as lead arranger in the corporate sale of Australian Wholefoods to Patties Foods/Pacific Equity Partners as well as the $35 million corporate sale of Popina Foods to ASX listed Freedom Foods Group.

After a year during which the ‘great lockdown’ threw global markets into crisis, private equity might just be the strategic catalyst needed on the road to recovery.

In June 2020, University of Oxford Professor Ludovic Phalippou caused a ruckus in the private equity (PE) world when he alleged that the industry is nothing but a “billionaire’s factory.” A diehard PE critic, Ludovic has become something of a champion of the alternative view regarding PE. He has interrogated the performance of PE investments, their glorified returns and general impacts. Yet, the author of ‘Private Equity Laid Bare’ remains largely isolated. The popular consensus is that PE is a game changer in the world of finance and investments.

The PE industry is today deeply entrenched and widely recognised. In fact, with assets under management (AUM) increasing from $423.6bn in 2001 to $1.3trn in 2010 before shooting to $5trn in 2020, the industry is poised to play a greater role in the form of driving economic recovery and anchoring future growth. The evolution of the industry attests to the fact that the days when PE investments were basically meant to keep companies afloat are long gone. In its place a powerful force that is a cog for sustainable economic development has emerged. It is bolstered by the emerging trend of PE investors taking a longer-term perspective beyond the five-year investment horizon.

Phenomenal growth

The new formidable PE industry is backed by a colossal number of resources. Data by Preqin show that by 2025, PE AUM will hit a staggering $9.1trn, a 15.6 percent compound annual growth rate. At this pace, the industry will in due course overtake the insurance industry in terms of gross premiums, which stood at $6.3trn in 2019 but contracted to $5.8trn last year. “The PE industry has achieved phenomenal growth over a few decades,” says Eric Deram, managing partner at global private investments firm Flexstone Partners.

The industry is today sitting on almost $1.9trn in dry powder. This is unallocated capital that is ready to be invested and that can be central to accelerating recovery in emerging markets and developing nations particularly in Asia, South America, Latin America and Africa (see Fig 1). The amount is bound to increase with surveys showing that more than 80 percent of international institutional investors – the largest investors in the industry – say they will invest in PE in 2021 at least as much as they did in 2020.

There is no doubt that across emerging markets and developing nations, COVID-19 badly ravaged economies in 2020. The World Bank reckons that due to the brutality of the pandemic, East Asia’s economic growth stalled for the first time in 60 years, growing by a mere 1.2 percent, with 19 million people plunging into poverty. Latin America and the Caribbean experienced the worst economic contraction with the economy declining by 6.7 percent. The economic downturn could push 28 million people into extreme poverty, with unemployment rates projected to reach 13.5 percent. Sub-Saharan Africa experienced its first economic recession in 25 years, with the economy declining by two percent.

The recovery begins

The pangs of COVID-19 are slowly easing. Vaccine roll out coupled with government intervention have seen countries embark on a cautious journey to return to normalcy. However, for most countries, it will be a while before economies can fully recover. For instance, it’s projected that the Indian economy, the world’s fifth largest, could take years to recover from the effects of the pandemic. For years, India has been among the stellar performers with economic growth averaging 7.2 percent the past decade. However, a brutal wave of COVID-19 this year is threatening to have prolonged negative impacts. During the first week of May this year, the country was experiencing an average of 380,000 in daily infections and 3,600 deaths.

It would be hyperbolic to expect the PE industry to save the world’s economy on the road to recovery. However, the industry has the potential to be a strategic catalyst in the recovery. No doubt the pandemic has negatively impacted traditional providers of capital, such as banks. In some regions, banks have seen an unprecedented spike in non-performing loans, prompting them to be more conservative. This has opened up opportunities for PE firms to fill the funding gap considering the need of private companies for fresh capital either to strengthen balance sheets weakened by the prolonged crisis or to make fresh investments to profit from new business opportunities arising from the crisis.

“As companies recover and emerge from the impact of COVID-19 they need growth and working capital,” says Anthony Mwangi, International Finance Corporation (IFC) Private Equity Lead for Africa. He adds that PE can play a seminal role in deploying capital towards recovery, especially considering the investable opportunities at attractive valuations that have emerged from the crisis.

The opportunities are vast, and diverse. They come at a time when the face of PE is fast evolving and investors appear to have a stronger risk appetite. When the industry started gaining prominence some two decades ago, the traditional PE model was PE firms buying into undervalued companies, building them up and exiting. While PEs are not ready to entirely discard this model, a shift towards the principles of sustainability guided by environmental, social and corporate governance (ESG) is emerging. PEs are investing in longer-term quality assets in sectors like technology, media, and telecom (TMT), medical, renewable energy, infrastructures, real estate, financial services, education, agriculture, water and sanitation, among others.

A McKinsey report on ‘Unlocking private-sector financing in emerging markets infrastructure’ contends that while developing countries require massive resources to finance infrastructure projects, they face challenges in mobilising the resources. To keep pace with projected gross domestic product (GDP) growth over the next 15 years, they need to invest more than $2trn annually. Africa alone must raise power and transport infrastructure investments to $55bn and $45bn annually respectively. Other countries facing huge financing gaps include Indonesia, Mexico, Brazil, India and Saudi Arabia.

Tragically, despite these financing gaps, many countries, including most of Africa, have shot themselves in the foot for failing to create an environment to attract PE funding for infrastructure projects. This explains why major private equity investors like Carlyle and Blackstone have left the continent ostensibly because they could not find large enough deals.

A dependable source of capital

Apart from investments in mega projects, private companies provide a vast arena of opportunities. In developing countries and emerging markets, the private sector is the engine of economic growth, job creation and poverty alleviation. PE firms have amassed substantial experience in investing in private companies and have become important providers of liquidity, debt and equity financing that is a catalyst for growth and transformation. “One of the primary sources of fresh capital for private companies that cannot tap the public equity markets and may not be able to incur more debt is PE,” observes Deram.

In fact, PE firms have proved they can be a dependable source of capital for companies. According to the Global PE Report 2020 from intelligence and research firm Acuris, the long-term growth of private credit has been nothing short of stratospheric. Two decades ago, the market scarcely existed, considering it was worth $40bn. It has since ballooned to more than $800bn. “This has been propelled by direct lending funds, which have grown in number and size in tandem with the leveraged buyout market they almost exclusively finance,” avers the report. It adds that private credit continues to grow in popularity, with 35 percent of firms having increased their use of these loans in the past three years and almost half (49 percent) now using private credit as much as traditional bank financing in their buyouts.

Unlike traditional lenders, particularly banks whose sole drive is to provide credit, the success of companies inspires PE firms. That is why PE investors take a hands-on role by providing advice and support in areas such as strategy, financial management and operations. This emanates from the understanding that for a majority of private companies, liquidity alone is never enough in guaranteeing growth. “Investing in PE is hands on. Fund managers generally take control (or significant minority positions) of the private companies they invest in because they want them to grow,” notes Deram.

The impact of PE investments and ripple effects on economic development are evident taking into account the value and volume of deals in regions like Asia-Pacific and Africa. A report by Bain & Company indicates that in the Asia-Pacific region, deal value defied the impacts of COVID-19 to rise to a record of $185bn last year, up 19 percent over 2019 and 23 percent over the previous five-year average. The region is forecast to be the biggest growth market with AUM set to increase from $1.6trn to $4.9trn in the next five years.

During the period 2015–20, a total of 1,257 PE deals worth $21.7bn occurred in Africa according to the 2020 Annual African Private Equity Data Tracker report. The rise was indicative of investors’ confidence in the continent’s economic resilience. Even at the height of the COVID-19 crisis last year, deal value declined only marginally to $3.3bn from $3.8bn in 2019. The ripple effects sprouting from the firms that have received PE funding are notable. They range from business expansion (for some, beyond their home markets), job creation and tax revenue for the exchequer.

“Emerging markets in Africa and Asia remain fundamentally attractive,” says Tristan Reed, economist at the World Bank. He added these markets are attractive because they offer PE firms excess returns owing to their limited financial sector development. “This makes sense because these are economies where capital is scarce, and there is also less competition for deals from other investors,” he says.

Helping hand from the IFC

The economic impact is well amplified by IFC, the private sector arm of the World Bank. IFC, which works to increase the involvement of PE funds in emerging markets, is often the first PE investor in some of the world’s poorest countries. Today, the organisation boasts of significant PE investments amounting to $7bn committed across a portfolio of over 330 funds. Through these investments, IFC has managed to deliver impact and development by addressing gaps in access to equity and growing private sector participation.

This stems from the fact that in emerging markets and developing countries, lack of risk capital hinders economic growth and slows entrepreneurship. By providing capital where it is scarce, IFC’s support of PE plays a critical role in development by helping build up companies that create jobs, drive prosperity, provide affordable and relevant goods and services, and strengthen a growing middle class. The organisation’s participation has also contributed significantly to sustainable development goals (SDGs) such as access to education, affordable housing, agribusiness, financial inclusion and job creation.

In Kenya, IFC investments in companies like Twiga Foods have had transformative effects. The agri-tech start-up buys agricultural produce from smallholder farmers and makes them available to urban populations at affordable prices. Last year IFC invested $30m in the firm to support more than 300 irrigated medium-scale contract farmers to complement its seasonal farmer supply base. As a link between smallholder farmers and the market, Twiga Foods has been instrumental in improving the livelihoods of over 4,000 farmers by providing a ready market for their produce. With its model a success in Kenya, the firm intends to use the funding from IFC and other PE investors to scale up and replicate the model in other African countries including Rwanda, Uganda, Tanzania, Nigeria and Ghana.

To ensure that PE firms become more involved in driving economic development, emerging markets and developing countries need to implement structural adjustments to tap more capital. On this front, they haven’t performed well. Currently, only about 13 percent of PE investments go to these regions. This is a fraction of the $1.9trn PE dry powder. Broadly, it is an indication that compared to developed markets the scale of PE in emerging markets remains substantially limited and is mostly concentrated in Asia. In 2018, for instance, only 23 percent of PE global fundraising went to emerging markets even though they represent 60 percent of global GDP.

“Emerging markets PE is far from homogenous, with stark differences between different markets. However, there are some headwinds that to varying extents do affect most of the regions,” says Mwangi. The stark differences are glaring. About 85 percent of PE capital raised in these regions goes to emerging Asia, with China and India accounting for 38 percent and eight percent respectively. Only a paltry amount of the capital finds its way to a region like sub-Saharan Africa.

Apart from investments in mega projects, private companies provide a vast arena of opportunities

Addressing the headwinds is imperative. In essence, emerging markets and developing nations must undertake structural adjustments to create an environment that is conducive to growing the pie of PE investments. This includes increased transparency, better governance and more supportive legal and regulatory environments. Others are creating deeper and more sophisticated capital markets, providing a wider plurality of exit options and allowing for more open market-based economies with increased entrepreneurial activity and competitive pressure. Another critical factor is the need to put in place a reasonable, transparent and stable tax system.

The forex factor

While these measures are vital, the forex factor remains a cornerstone in the PE industry. For PE funds, investing in emerging markets usually comes with a currency risk. Consequently, uncertainties regarding foreign exchange are not healthy and the absence of, or weak, forex controls has often been a deterrent for investments. This is because most PE funds are either dollar or euro denominated. Mitigating currency risks thus becomes crucial.

“Having a stable and predictable exchange rate is probably the most important factor in attracting PE investment,” says Reed. He explains that international PE firms typically book returns in dollars. This implies that currency devaluation can severely harm returns even if a portfolio company is growing fast in local currency terms. Moreover, when the price of foreign currency is ambiguous, for instance given the existence of multiple rates on formal or informal markets, it is difficult for PE investors to accurately price investments in dollar terms. “The uncertainty will make them less likely to invest,” he reckons.

Risk factors notwithstanding, PE firms are always on the lookout for quality deals in emerging markets and developing nations. Apart from the drive to make impactful economic contributions, impressive returns are a major motivation. To a large extent, it explains the rapid bounce back of the PE industry following a challenging year occasioned by COVID-19. Preqin data show that in the first quarter of the year, PE fundraising activity had managed to return to pre-pandemic levels. Funds raised amounted to $188bn across 452 funds during the quarter, up from $163bn and 431 funds in the same period last year (see Fig 2).

In terms of returns, the PE industry continues to maintain a splendid trajectory outperforming public equity markets and outpacing other private markets asset classes. By all accounts, they put into disrepute the logic propagated by Professor Phalippou that PE managers, as opposed to investors, are the key beneficiaries of PE returns owing to the exorbitant fees they charge.

Good governance and transparency are basic requirements in private companies in which PE firms invest

In the first quarter of 2020, the industry recorded a sharp decline in performance, according to McKinsey. But it recovered quickly to post a nine-month trailing pooled net internal rate of return (IRR) of 10.6 percent through September 30. On a pooled basis, PE has produced a 14.3 percent annualised return over the trailing 10-year period, beating the S&P 500 return of 13.8 percent by 50 basis points.

Notably, all other private markets asset classes posted negative returns over the same period. Infrastructure and private debt with 1.3 percent and 2.1 percent returns respectively came closer to breaking even. However, closed-end real estate and natural resources – at 4.2 percent and 16.7 percent – faced more challenging return environments.

“The long-term performance of PE remains strong,” observes Preqin in its 2021 report. It adds that while it is too early to gauge the full impact of the pandemic, buoyant stock markets, the resumption of economic growth and prolonged low interest rates augur well for future performance.

The inspiring returns are encouraging yield-hungry institutional investors and high-net-worth individuals to continue directing resources to PEs. Last year, 66 percent of institutional investors like pension funds and insurance companies invested in PE, up from 57 percent in 2016.

The World Bank headquarters, Washington, DC
The World Bank headquarters, Washington, DC
Emerging unscathed

The resilience of PE has been momentous. Across the globe, COVID-19 has caused devastating damages on the private sector. Despite the Covid-inflicted disruptions, PE-backed private companies have fared relatively well and are emerging somewhat unscathed. A key reason has been the ‘all hands on deck’ attitude of fund managers who were instrumental in supporting companies during the difficult months of the pandemic. Entrenching the principles of ESG and impact investment is a key factor in propelling the PE industry to the centre stage of economic development. The PE industry acknowledges the world is facing threats on all fronts. These threats, which cut across climate change, environmental pollution, bad governance, and corruption to name a few, are even more pronounced in emerging and developing nations.

In Africa, for instance, climate change is a major threat to human health and safety, food and water security and socio-economic development. At the current rate of global warming, the continent is on the verge of losing up to 15 percent of GDP by 2030 according to the Economic Commission for Africa. The PE industry is determined to be a champion of sustainable development.

The headquarters of management consulting firm, Bain & Company, Boston
The headquarters of management consulting firm, Bain & Company, Boston
In this respect, PE firms have avoided investing in polluters like fossil fuels, mines and sections of the manufacturing sector. Besides, good governance and transparency are basic requirements in private companies in which PE firms invest. This explains why more investors are actively incorporating ESG into their due diligence processes and investment committee decision-making. Blackstone, for instance, is leading on this front. Last year it announced that its next step in ESG is reducing emissions in new acquisitions by 15 percent.

“There has been increasing awareness that investments need to take account of ESG risks and in our experience investments that do so generate better financial returns,” explains Mwangi. He adds that as more PE investors embrace investing for impact, it will be a win-win for all because financial returns will be generated while taking care of the greater good by protecting the environment, generating jobs and reducing poverty.

Economic value

The PE industry has visibly demonstrated its ability to propel economic recovery and drive future growth in emerging and developing nations. Though still on a smaller scale, the changing dynamics point to the industry increasing its contributions substantially in the coming years.

As American billionaire investor Bill Ackman accurately observed, PE investors have proved they create a lot more economic value than they destroy.

The Organization for Economic Cooperation and Development (OECD) has unsurprisingly upgraded Iran's rating in the country risk classifications of the Participants to the Arrangement on Officially Supported Export Credits (CRE) from 6 to 5.

The long-awaited upgrade was announced following the organization’s last meeting on Friday. The last upgrade in Iran’s rating goes back to June 2016, when Iran’s ranking improved one notch, moving from 7 to 6.

The country risk classifications of the Participants to the Arrangement on Officially Supported Export Credits are one of the most fundamental building blocks of the arrangement rules on minimum premium rates for credit risk, according to OECD.

The important decision comes amid growing concerns over the future of the nuclear agreement signed in 2016 by Iran and the six world powers, mainly due to US President Donald Trump’s hostile approach toward the historic deal. Trump recently threatened to abandon the deal in spring unless it is fixed to his liking. His secretary of state, Rex Tillerson, held talks with Europeans this week to persuade them to join the US in amending the nuclear agreement and imposing new sanctions on Iran.

“This was indeed a positive signal from the Europeans and a further indication of their interest to continue engaging with Iran within the framework of the nuclear deal,” Arash Shahraini, deputy head of Export Guarantee Fund of Iran, told the Financial Tribune in a telephone interview on Friday.

“The upgrade reduces the cost of attracting foreign finance, and as a result helps us increase our foreign exchange reserves,” he said.

Deserving Better

But the measure was not unexpected for Tehran as the authorities had been waiting for the upgrade after the economic sanctions were eased in January 2016.

Pointing to country’s reserves and low external debt, Shahraini is of the opinion that Iran deserves a higher classification, namely 3 or even 2.

As the OECD puts it, the country risk classifications are meant to reflect country risk, which is composed of transfer and convertibility risk (i.e. the risk that a government imposes capital or exchange controls that prevent an entity from converting local currency into foreign currency and/or transferring funds to creditors located outside the country) and cases of force majeure (e.g. war, expropriation, revolution, civil disturbance, floods, earthquakes).

Iran’s official reserves were projected at $123.5 billion in 2016-17, according to a report released by the International Monetary Fund in February 2017. The country’s total debt to GDP stood at 2.2%, which is lower than any other country in the world.. Iran also recorded the highest economic growth in the world according to the global lender’s 2016 report – 12.5%.

A recent report published by the EGFI, Iran’s state-owned export credit agency, compares Iran’s economic indicators with the average performance of countries in each risk classification, backing its claim that Iran has outperformed other countries in 2016 and deserves lower risk.

The senior EGFI official said, “There are other factors that have a bearing on the OECD’s final assessment including political risks and a country’s history in settling its external debts,” he said.

Due to the constraints in financial relations with its foreign trade partners, Iran had been unable to settle $3 billion of its external debts during the sanctions era. “However, following the lifting of the sanctions this issue was prioritized by the Central Bank of Iran…within a year we either repaid our debts or reached agreements over restructuring.”

Non-OECD Finance Already Here

Shahraini believes that the upgrade in Iran’s risk classification will help encourage financial institutions in the OECD-member countries to engage with Iran, where their non-OECD competitors have already started doing business.

Iran has concluded several foreign finance contracts in the past six months including two agreements worth $25 billion with China Development Bank and CITIC Trust, a no-cap deal with Russia’s Exim Bank, a €5 billion deal with Italy’s Invitalia Global Investment, a €1 billion deal with Austria’s Oberbank, a €500 million deal with Denmark's Danske Bank and two contracts worth €13 billion with South Korea’s Exim Bank and K-Sure.

Unlike OECD members, export credit agencies in the BRICS countries (Brazil, Russia, India, China and South Africa) have gradually improved Iran's rating in their risk classifications since the nuclear deal was implemented. The five-nation bloc now accounts for one-third of Iran’s non-oil trade.

According to  Fdi  ,espite increased international isolation and diplomatic tensions, the OECD has an optimistic view on Iran. Sebastian Shehadi reports.

The OECD has upgraded Iran’s country credit risk rating to 5 from 6 (out of 7), putting it on par with Brazil and Jordan, among others, the Paris-based institution said in a statement on January 26.

‘Country risk’ encompasses unforeseeable circumstances, such as political unrest and natural disasters, and transfer and convertibility risk, such as governments’ imposing capital or exchange controls (that is, banning foreign remittances). The methodology classifies “countries in connection with their agreement on minimum premium fees for official export credits”, according to the OECD website.

“A better risk rating will serve to boost Iran's financial and credit status in international markets, as well as provide potential incentives for Asian and European partners to deepen their respective levels of engagement with the Islamic Republic,” said James Appleyard, managing consultant at global risk and strategic consulting firm Verisk Maplecroft.

Iran’s ranking previously moved up a grade in June 2016, from 7 to 6. Iran’s investment promotion agency, the Organization for Investment Economic and Technical Assistance (OIETA), said the country’s economic performance accounts for the upgrades, along with the efforts made by its central bank, foreign ministry, the Export Guarantee Fund of Iran, and the OIETA. As a result, Iran’s exports soared by an estimated 41.3% in 2016, while imports remained around the more usual mark of 6%, according to the World Bank.  

The OECD’s decision comes amid rising sociopolitical unrest in Iran and growing concerns over the future of the 2016 nuclear agreement signed by Iran and the P5+1 group. In 2017, US president Donald Trump threatened to abandon the deal unless certain conditions were met.

In early January 2018, Iran experienced its worst bout of political unrest since 2009, resulting in dozens of deaths and hundreds of arrests. The protesters claimed to be rallying against rampant corruption, rising fuel and food prices, as well as dashed hopes following the lifting of UN and EU (but not US) sanctions against Iran in 2015 and 2016, after which the public expected better economic development.

The main factor behind the OECD’s upgrade was Iran’s positive macroeconomic indicators, as evidenced by the IMF, which projected Iran’s real GDP to expand by 3.5% and 3.8% in 2017 and 2018, respectively, according to Dr Arshin Adib-Moghaddam, an expert on Iran at the School of Oriental and African Studies. In 2022, the IMF estimates Iran’s economic growth will stand at 4.1%. “The [recent] protests were about the mismanagement of distribution of some of these economic gains, rather than the economy itself,” he added.

Dr Scott Lucas, professor of international politics at the UK’s University of Birmingham, said the OECD’s risk ratings can be rather bullish and positive. Like any international organisation, it may also have an agenda: in this case, keeping the Iran nuclear deal in place.

The World Bank’s latest Iran report (October 2017) also gave a positive, albeit tempered, outlook. “The Iranian economy strongly recovered in 2016, on the back of a significant rise in oil production and exports, following the removal of nuclear related international sanctions,” it said. “However, unemployment remains high and non-oil sector activity remains subdued, as anticipated foreign investment flows have not materialised, in the absence of a full integration of the banking sector with the global banking system and continued uncertainties regarding full implementation of the [nuclear deal]. Growth prospects in the medium term are modest.”

Following the nuclear deal and the lifting of sanctions in 2016, Iran’s inbound greenfield investment soared, reaching a record high of $12.18bn, according to greenfield investment monitor fDi Markets. In 2017, this figure returned to Iran’s more usual FDI mark of $2.13bn.

World Business Year prepared OFAC latest update of the FAQ's relating to the lifting of certain US sanctions on Iran.
Please find attached file

Worldbusinessyear.com is your final Project finance and investment source to get in-depth analysis of Iran's Economy, Q&A for investment in Iran
If you have any question regarding investment or project finance in Iran please send enquires to :
This email address is being protected from spambots. You need JavaScript enabled to view it.