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ANALYSIS

Cars passing through Tohid Tunnel in Tehran, Iran.

Iran needs $1.5trn investment to double economy

DUBAI, March 2, 2016

Iran’s 2025 strategic economic plan aimed at doubling the economy from the current $415 billion in the next decade necessitates investments to the tune of $1.5 trillion, a report said.

The country thus epitomizes an untapped and fully resplendent goldmine that is fast attracting the attention of global opportunity miners, according to the report entitled “Perspective on Iran’s Macroeconomy and Opportunities across Industries for Global Companies – A Goldmine of Opportunities” from Frost & Sullivan, a growth partnership company.

The Iranian Government’s ambitious efforts to make the country globally competitive are directed towards creating a favourable business climate for companies to enter and invest in developing its core focus sectors.

Several initiatives are being ushered in to achieve the 2025 strategic growth objective and chief among them is to discourage the dependency on oil and focus on enhancing manufacturing in non-oil sectors.

The Iranian government is planning on progressively increasing its net investment in manufacturing to $25.5 billion by early 2018, $35 billion by 2020, and $62 billion by 2025.

The Iranian Government is keen on attracting foreign investment through BOO, BOT and/or PPP modes primarily in sectors of infrastructure, downstream segments of oil & gas, mining and petrochemical projects and is encouraging joint ventures with local partners in the aforementioned sectors.

“Even as surrounding states in the Middle East witness turbulent economic conditions, Iran is mobilizing its efforts targeted at economic proliferation and this is opening up immense growth opportunities for local and foreign companies alike,” said Y S Shashidhar, managing director, Middle East, North Africa and South Asia, Frost & Sullivan.

“Value added manufacturing growth has been identified as the key to the country’s economic transformation resulting in the Iranian Government undertaking measures to facilitate inflow of investments and technology while industries strive to metamorphose their capabilities and processes to achieve the set goal", added Shashidhar.

The 2025 strategic development plan identifies core industries that the Iranian Government shall focus on for development given their potential to be significant contributors to the GDP. These core sectors are petrochemical products, mining and minerals along the industry value chain including plastics, metals and minerals, foods and beverages, pharmaceuticals, industrial machinery and equipment, home appliances, textile and apparel, ground vehicles, rail, and maritime, rubber, and power generation and transmission.

The Iranian Government plans to increase the capacity of its core industries within the next 10 years through a slew of measures which include:

•    Enhancing productivity through adoption of advanced and world class technologies

•    Focus on innovation-driven manufacturing

•    Diversifying its economy from O&G to focus on high value-adding downstream segments

•    Increase the contribution of medium and high technology manufacturing to overall manufacturing

•    Enhance export contribution to over 30 per cent of domestic production

•    Set up joint venture manufacturing plants in the region to decrease the cost of export and make an easier access to the global market

This emphasis on manufacturing growth has opened avenues for global companies and investors to participate in Iran’s economic momentum as providers of technology, finance and manufacturing process enhancement support.

Frost & Sullivan’s research indicates that across all of the core sectors, technology up-gradation is observed to be of utmost priority. To achieve this, the Iranian Government is encouraging global companies to partner with local companies through technology sharing and support in developing design and engineering in industrial facilities and the infrastructure sector. Access to finance is another equally critical requirement.

The Iranian Government and local industry understand the imperative in inviting investments to kick start stalled projects and also spur activity through new project announcements to meet the 2025 development plan targets. Besides technology and finance support, the local industry also evinces need for process enhancements to their manufacturing facilities and this is another huge opportunity area for global majors to enter through partnership.

Besides the boost to manufacturing, the Iranian Government has also increased the share of tax revenues in its annual budget to decrease dependence on the O&G sector. Currently, tax revenue accounts for 6 per cent of the total GDP; it is forecast to reach more than 16-18 per cent by 2025.

Further efforts are underway to create and adopt sustainable employment policies and environmental practices for conducive investments and work environment. The country is also endorsing its International trade developments through liaising with foreign companies by leveraging WTO membership to increase share of global trade and FDI into the country. – TradeArabia News Service




Tags: investment | Iran economy |

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