The Forum for Partners in Iran's Marketplace
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     

June 2021, No. 97


Industry

Iranís New Industry Partner


Updated foreign investment statistics on February 18, 2021 show that in the countryís industrial, mining and commercial projects, the volume of foreign investment in the projects under operation has decreased by about 7.8 percent.


The record of attracting foreign investment in the 11 months ending Bahman 1399 (February 18, 2021) indicates the arrival of a new partner in Iranian industry. The latest statistics from the Ministry of Industry, Mine and Trade (IMT) show that ďmanufacturing of metal productsĒ, ďmanufacturing of rubber and plastic productsĒ, ďmanufacturing of machinery and equipmentĒ and ďmanufacturing of chemical materials and productsĒ are the first four groups that can be invested.

Updated foreign investment attraction status:

Official statistics published by the Ministry of IMT send a contradictory message about the fate of foreign investment in the country. On the one hand, the volume of foreign investment approved in 11 months of 1399 has doubled, and on the other hand, only 20% of these funds have been completed or so-called absorbed in the form of industry and mining projects. Such a trend indicates the difficulty of creating and developing business in Iran for foreign actors and reminds the need for change in this situation in order to improve economic growth. Despite these problems, Canadaís presence as a new player on the list of foreign investors in the country is a matter for consideration.

Updated foreign investment statistics on February 18, 2021 show that in the countryís industrial, mining and commercial projects, the volume of foreign investment in the projects under operation has decreased by about 7.8 percent. Recent statistics from the Ministry of IMT on the volume of foreign investment in the country in 1399 show that Iran has experienced a 238 percent growth in approved projects, but only 21 percent of the $1.821 billion in foreign investment has reached the exploitation stage.

On this basis, more than 79% of the approved foreign investment has not been achieved and has been grounded in the administrative and executive cycle. More precisely, of the total approved investment in the three sectors of industry, mining and trade, only $395 million has been injected into enterprises and is about to be exploited, which is less than the numbers for 1398 (2019/20), but another $1.426 billion has not yet reached these sectors.

Reiterating the success of deprived provinces such as Sistan & Baluchestan and Khuzestan in attracting foreign capital, the new report of the Ministry of IMT emphasizes that more than 56% of the approved foreign investments in these two provinces have been injected in the form of mining, petrochemical and industrial projects. On the other hand, the industry still has the upper hand in obtaining the highest amount of foreign investment and 88.9% of all projects belonged to this sector.


Official statistics published by the Ministry of IMT send a contradictory message about the fate of foreign investment in the country.


Also, the number of projects being exploited by foreign investors in the country has increased from 40 in 1398 to 55 in 1399. At the same time, the strong presence of actors such as Germany and Canada in the ranks of countries interested in investing in Iran has weighed on the scales of the inflow of foreign money into the country in favor of Western actors. Previously, this issue, mainly with the presence of China, India, Turkey and the UAE, showed the strong presence of regional and Eastern actors in Iran.

Details of foreign investment statistics until the end of Bahman 1399 (Feb 18, 2021):

In a year when the country is moving towards positive economic growth again, the situation of foreign investment must be monitored. Basically, foreign investment in Iran has three parts and includes the approved part, the part under implementation and the part under operation. At the end of the 11th month of 1399, the country has witnessed an upward trend in the two sections of ďapproved investmentĒ and ďunder implementationĒ, although the volume of foreign investment in operation has decreased. The root of this paradoxical message in the industry leads to a serious difference, which shows that many approved foreign projects have serious problems on the way to realization and therefore do not reach the finish line.

A recent report by the Ministry of IMT shows that the majority of foreign applications for industrial investment are related to projects that target between 80 and 100 percent ownership. This project has reached 56 cases by Mid-February, and the founders of this number of projects intend to bring a total of more than 925 million dollars of capital to the country. In the joint venture sector, the number of projects was 67 and their value was over $392 million. Among the projects under the title of Civil Partnership, Mutual Sale and BOT, there are 12 projects in which the volume of foreign investment is about $503 million.

A closer look at the report of the Ministry of IMT shows that Germany, China, Canada, Austria and Turkey have the largest share in terms of investment volume. In this list, Germany with $481 million and China with $433 million stand higher than other countries. The sudden presence of Canada in the list of countries interested in participating in Iranian industry with a share of 267 million dollars in foreign investment is surprising. Of course, Germany has the highest investment-to-project ratio, with an overflow of about $55 million per project. In terms of the number of projects, of course, Afghanistan still has the upper hand and with 43 projects, it has the highest share.

Final statistics of foreign investment till end of Bahman 1399:

But while the Ministry of IMT announced the 11-month statistics of foreign investment in all sectors at about 4.327 billion dollars, the statistics of the Ministry of Economy from the last meeting of the Foreign Investment Board show that the countryís foreign investment exceeded $6.2 billion. This statistic should be announced as the final number of Iranís foreign investment in 1399. According to the ministry, the meeting approved 65 foreign investment projects, including 44 new projects, 5 related to increasing foreign investment and another 16 related to changes in foreign investment plans and foreign exchange transfers of investors.

According to the report, the value of the new foreign investment projects approved at the meeting is equivalent to 1.062 billion dollars, which is related to the implementation of projects in various economic sectors in the country; According to the report, foreign investors are involved in the projects from 16 countries. Also, the place of implementation of foreign investment projects approved in this meeting is in 20 provinces of the country. Accordingly, the number of approved investment projects increased from 119 in 1398 to 222 projects in 1399. Meantime, the amount of approved foreign investment rose from 5.2 billion dollars in 1398, to 6.1 billion dollars in 1399, which indicates a significant increase. 

The secret of investment growth:

Tracking the entry of these foreign resources into industries shows that sectors such as the chemical, petrochemical, home appliances, mining and machinery industries have succeeded in becoming a destination for foreign currency based on this principle of comparative advantage. In 1398, the country had been able to attract $854 million through the foreign capital industry sector. In 1399, however, $1.821 billion in foreign investment has been approved in the first 11 months of the year, an increase of about 113 percent over the same period last year. This figure is supposed to enter the country as a result of the construction of 120 different industrial projects. According to the study of Donyaye Eqtesad daily, the major part of this investment has entered or will enter the provinces of Fars, Khuzestan, Sistan and Baluchestan, Tehran and Kermanshah.

UNCTAD estimates that Iran, as one of the major economic hubs in the Middle East and North Africa region, has a high potential for attracting foreign capital, but for various reasons, including a lack of transparent banking relations with the world and the sanctions, has been deprived of foreign capital. Of course, in general, Iranís performance during the pandemic period, despite not changing the status of sanctions, has improved and has been upward in most sectors. At the same time, the weight gain of Western partners in the countryís major foreign investment portfolio is significant. Although the secret of this success is undiscovered, it is possible that the devaluation of the rial, numerous barriers to the import of foreign goods and the failure to stop the development process in some industries such as petrochemicals have been the main factors stimulating foreigners to be more present in the Iranian market: A factor that, of course, does not currently have the power to shake the industry more.

A simple calculation shows that the share of foreign investment in the industry is 30%. Since only 20 percent of this share has reached the operational stage, it is likely that only 5 to 60 percent of the total annual foreign investment approved by the country will go to the industrial sector. The figure is generally in the range of $300 million to $500 million. The country, meanwhile, needs to attract $28 billion to $50 billion in foreign investment annually to achieve 8% economic growth rate. Industry also needs at least $5 billion to $10 billion in investment per year, given its share of the Iranian economy.

 

Subscribe to
IRAN INTERNATIONAL

CURRENT ISSUE
   
  June 2021
No. 97