World Business and Economic Analysis
World Business and Economic Analysis
Majlis Speaker Ali Larijani underscored the necessity of absorbing foreign investment as a key requirement for achieving the targeted economic growth rate.
"To hit the target of 8% economic growth, the potential for attracting foreign investment should be exploited," he was quoted as saying by ICANA.
Larijani was speaking in the central city of Qom on Sunday in a conference on domestic economy in the aftermath of the Joint Comprehensive Plan of Action, the formal title of the July 14 nuclear deal.
The action plan, which was reached with P5+1 (the five permanent members of the United Nations Security Council plus Germany), relieved Iran of severe economic sanctions in exchange for time-bound curbs on its nuclear program.
It took effect on Jan. 16 to rush a flurry of business delegations to Iran, seeking to seal deals with local partners in an untapped market that offers huge scope for investment.
"We should take advantage of the situation that has emerged in the wake of the nuclear agreement by encouraging foreign investment," he said.
Larijani said the problems of local manufacturers should be addressed and they could be encouraged through government incentives.
"The parliament should legislate to remove obstacles to raising production and improve the business climate, thereby paving the way for a production boom. If necessary, the current relevant laws should be revised," he said.
The speaker reiterated support for the nuclear negotiating team, reminding detractors that the nuclear dossier, in which the country was entangled for 12 years, has been closed recently.
"I basically believe that nuclear negotiations went well and were conducted at the right time, although admittedly the negotiating team could have done better in some respects," he said.
"Despite claims by some [critics], the nuclear talks were carried out thoroughly. We should consider what was gained in return for what was compromised; sanctions were lifted and the nuclear knowhow was preserved."
Larijani praised President Hassan Rouhani for negotiating deals worth tens of billions of dollars in his recent trip to Italy and France late last month, including a contract for the purchase of over 114 Airbus aircraft to revamp the worn-out national fleet.
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Iran's rich deposits of zinc, copper, gold and other minerals are tempting international investors after the lifting of Western sanctions.
Some agreements have already been struck while some foreign firms have been looking at Iran's mining and metals sector in the weeks following the scrapping of sanctions as part of a nuclear deal, which went into force last month, reported Reuters.
Iran, which boasts one of the world's largest undeveloped zinc projects and myriad other mines, has been trying to lure investors since it became clear that sanctions would be lifted under last year's deal signed by Tehran and six world powers.
Iran's state-owned mines and metal holding company IMIDRO told an Australian mining conference in November that its mining sector needed $20 billion in investment by 2025.
"Iran absolutely has world class mining assets, which have hitherto been shrouded from investors, but we're in the depths of one of the darkest, worst downturns in mining for some time," said Neil Passmore, chief executive of Hannam and Partners boutique merchant bank in London.
The slump in commodity prices has hit international mining firms, forcing them to sell assets, cut dividends and slash capital spending to preserve cash, but some deals with Iran are still being done.
In India, national aluminum company NALCO said last month it planned to send a team to Iran to explore setting up a smelter worth about $2 billion and state-run KIOCL is considering building an iron ore pellet complex.
Other companies from Italy and China to South Korea have either signed deals or are looking into possibilities.
Although minerals development may take years, Iran's bounty and low energy costs will eventually build it into a substantial player in the global metals industry, analysts say.
Iran's Mahdiabad project is one of the world's largest zinc deposits, which was previously due to be developed by Australian's Union Resources, with annual output of 300,000 tons a year.
Iran has 68 types of minerals, including iron ore, coal, gold and copper with total reserves of 43 billion tons.
Besides growing as a producer, the country of 80 million people is also set to help boost global demand for metals since it is the biggest economy to rejoin the global trading system since Russia, following the breakup of the Soviet Union over two decades ago.
"As they get more oil revenue, there's no reason why they shouldn't look to diversify the economy and drive metals exports," said Robin Bhar, head of metals research at Societe Generale in London.
"It plays both ways, as they're welcomed back into the international fold, hopefully they'll also contribute to the demand side of the ledger, as they've got a young and rising population."
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A member of Iran’s Car Manufacturing Policymaking Council has announced that France’s Peugeot will compensate for its previous contract with Iran.
Mohammad Reza Najafi-Manesh said Iran has set several conditions for foreign automakers which need to be strictly followed for cooperation of any kind; accordingly, for manufacturing cars inside the country, the share of domestic production needs to be a minimum of 40 per cent to reach 80 per cent in an envisaged time span.
“The basis of joint collaboration between Iranian and foreign automakers needs to be production of cars inside the country through the real sense of the word rather than mere imports,” he emphasized.
He further asserted that a at least 30 per cent of the produced items need to be deployed to global markets; “investment in technology transfer has been included as yet another condition in foreign car deals by the Iranian Ministry of Industry, Mines, and Trade.”
“Only countries and companies who comply with these conditions will be warmly received by Iran,” he continued.
Najafi-Manesh refuted any ongoing negotiations with American automakers maintaining “we have set general prerequisites for Asian countries which need to be abided by before the launch of cooperation.”
Touching upon the deal with France’s PSA Peugeot Citroën during the recent visit of President Rouhani to Paris, the official noted “Peugeot has accepted all the stipulations as well as that the company will produce auto parts domestically in addition to exports of the products; moreover, it has been agreed that the production would plunge if the export is less than the anticipated amount.”
“Peugeot will also benefit from Iranian market sharing interests; all benefits are perceived to be common; the contract has been sealed in such a way that both France’s Peugeot and Iran Khodro Industrial Group (IKCO) will enjoy the benefits of implementing the joint project,” he underlined.
The member of Iran’s Car Manufacturing Policymaking Council concluded that “Peugeot will make amends for all the losses of earlier deals reimbursing Iran in full.”
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