Playing polo on the golf course!

Iran's Deputy Minister of Economy, Dr. Behrouz Alishiri, talks about strategies to invite Iranians abroad to invest in Iran and the establishment of the Iranian Expatriates Fund in his interview with "Tejarat-e-Farda". He stated that they need to be encouraged to make well-protected and profitable investments in Iran. Pointing at the Iran bonanza, he emphasized the crucial importance of a roadmap and collaboration between executive branches of the government to meet the $30 billion target.



Mr. Rouhani has recently invited all Iranians abroad to invest in Iran. It seems that the 11th administration's approach to foreign investment differs significantly. What measures need to be taken to succeed?
The "invitation" strategy is logically based on both internal and external potentials and capabilities of Iran's economy; for instance a two-million dollar investment in laser print industry by an Iranian living in Europe was approved in order to replace the imports to Iran. There are so many opportunities in Iran bonanza. Strategy is important but execution is everything. After the invitation, Iran's government must be ready to take measures and set out with aim of attracting the investors. I have not seen such determination so far.
In my assumption, the executive branches of the government such as Iran Cultural Heritage, Handcrafts and Tourism Organization, Free Zones Organization and the Ministry of Energy each plays two prominent roles. First, providing a framework and defining all the procedures, laws and regulations as well as incentives. Second is creating investment packages to introduce all investment opportunities and projects to potential investors. Detailed and standard investment packages are prerequisite to attract foreign investments and that is our weakness.

Who is in charge?
Different executive branches of the government, as I mentioned Tourism Organization, Ministry of Energy and so on. But the main and arduous task to be taken is to clarify the share of each segment, for instance, transport, services, oil and gas, tourism or manufacturing and mining in Iran's GDP. The next step would be setting an objective for economic growth rate to be the leading country in the region and then specify the share of each segment to meet that objective.

Is it specified in the Development Plan?
The only thing specified in the Development Plan is the 8% economic growth rate which is our wish. We need plans for our wishes to come true. Therefore, the share of each segment needs to be specified and after that each of those branches in charge will set out to fund their segments (for example $25 B this year, $30 B next year and $40 B the year after that) with the purpose of contributing to Iran's GDP. Goals and strategies must be set first and after that plans for executing those strategies need to be determined. Government executives should define tools and the measures to be taken. You may need financial and consultation services, redesign in the structure of your organization and making layoff decisions. The key to success is a well-defined roadmap. That is why I say we are playing polo on the golf course! The rules of the game are not introduced by the government. In the past six years we asked the executive branches to step in but they resisted. It is not possible to evaluate the efforts of government organizations.
This year we set a target of $6.5 B foreign investment. In order to hit that, we restructured the organization as a result of which, experts assumed the role of top managers in decision making which is revolutionary. In the previous structure we used to ask particular organizations to attract say $1 B foreign investment and they got bonus; failure to do that indicated their inability.

We fell short of our targets last year…
We hired a foreign football coach with a million-dollar contract for our national team but it is not possible to work with foreign consultants in our energy sector, airports, subway development, industry and mining. Why is that? Which one takes the precedence? We are facing shortages in electricity supply. We called out for foreign investment and the presence of international companies in our energy sector. Just like volleyball which needs a foreign coach, we need foreign investment to develop. It is not difficult to embark on development projects funded by government revenues regardless of the outcomes. Our government officials must have a duty to finance the projects. That is how procedures, structures and even the human resources will be reformed.
With regard to what you mentioned, falling short of our targets for attracting foreign investments is pretty normal. Let me give you an example; today we approved of a two-million dollar investment plan. The investor's license has been issued and the land permission is due in July. He will be able to import the machinery next year as you can see it takes two to four years to complete a project and there is no sudden influx of cash. The money is gradually injected and thus a gap exists between the approved and the real investments.

The imposed sanctions against Iran were tightened in recent years yet the trend for foreign investments was upwards. However, it dropped between the years of 2006 and 2008 prior to "tightened sanctions". Do sanctions impact upon investments?
Sure. Lots of international corporations are prevented from doing business in Iran; some face difficulties after being issued the license to work in Iran. Sanctions prevented some firms from entering Iran. On the other hand, there are reasons for the growth in foreign investment. Iran was one of the best ranked countries in the world for foreign investment attraction. Despite the growth, the country certainly has great potential for future growth. According to the figures, huge investment was made in Iran despite the sanctions and restrictions.
There is also another point; the gap has not been closed so far, hence it's not possible to put an estimate on the impact of sanctions on foreign investment. After issuing the license, some car manufacturers, international corporations and even small sized companies told us they can no longer do business in Iran. It's indisputable that we are under international pressure.

Almost a total of $ 4 billion in foreign investment has been attracted in recent years. Can you provide us with an estimate of Iran's true potential?
Sanctions are contributing factors. With no sanctions and well-defined growth targets, it would be possible to gradually reach $10 B to $30 B. There is a chance of 40% to 50% growth in sectors such as subway, airport development, high-speed railways, irrigation projects, alternative energy sources, steel industry, agriculture etc. I think $30 B would be the minimum amount.

How many years does it take to attract $ 30 B?
With a roadmap and attracting foreign investment as the top priority and division of labor, it would be fulfilled at a rapid rate.

You usually talk about the completed projects. Have you ever analyzed the defects in unfinished investment programs?
There are obstacles in the path of making investment; from issuing the license to agreeing to a contract. There are both internal and external factors. According to UNCTAD reports only ten out of ten thousands foreign investment plans are feasible in Iran.

Sanctions are the external factors, what are the internal factors?
For example disagreements with the Iranian partners or the governing body, disagreements over feedstock pricing or disputes over the location, there has been projects put on hold for more than 13 years.

Have we ever cancelled a license?
Not yet. According to Article 9 and Article 13 of Iran's Foreign Investment Promotion and Protection Act, in case of government intervention, the investor is awarded compensation by the government. Iran's government has never intervened.

Are there any projects put on hold by the foreign investors?
It rarely happens. Foreign investors study the feasibility of the project based on extensive investigation and research. It would be so difficult to take out the invested funds.

With regard to recent remarks by the President, are there any plans for particular promotions and incentives for Iranians abroad?
According to laws and regulations, the government is not allowed to provide individuals and firms with incentives. Incentives are for sectors. Our second generation incentives are offered for bringing the know-how to the country or when the products can be exported or replace the imports.

Are there any objectives set with regard to foreign investments by Iranians abroad?
We try our hardest to promote investments by Iranians. In my assumption "invitation" is a good strategy but we need to make our economy attractive for them. They are instinctively interested to return to Iran's market. In China, foreign investment by the Chinese residing in other countries accounts for 80%. This is called "reverse immigration" our plans and strategies must be focused on their return and as I said Iranians are interested to return home.

Maybe not…
I am not just talking about major investments. There are other capabilities as well. Families who have lived in European and Asian countries for several years are willing to return home with only one or two hundred thousand dollars.

Major part of Iranians fled the country as a result of poor business environment…
First of all, we need to attract small investors. After gaining approval from the Securities and Exchange Organization, the Iranian Expatriates Fund will be established to attract investments by Iranians abroad. Of course, the business environment improvement is of crucial importance; their investments must be well-protected and profitable. The ROI (Return on Investment) is currently 5% to 6% in some European countries. In Iran it amounts to 30% in some projects, albeit measures need to be taken to curb the inflation and then the distinctive desire for return would help us.

Can you put an estimate on the investments by Iranians abroad? What's their share of the total $30 B foreign investment?
A quantitative analysis has not been conducted. In both the Ministry of Economy and the Organization for Investment, Economic and Technical Assistance of Iran we are trying hard to boost Iranians' investments by establishing the Iranian Expatriates Fund.
It is not possible to accurately estimate the combined net worth of Iranians abroad, and it is not all about the financial resources. There are cultural and technical capabilities as well. Let me give you an example; an Iranian who works for an international corporation is able to encourage his firm to work and invest in Iran. We would welcome any form of collaboration with open arms.