Time to invest in Iran?
Source: CommsMEA - March 8, 2016
According to the latest study by Frost and Sullivan, the 2025 strategic economic plan aimed at doubling the Iran economy from the current USD 415 billion in the next decade necessitates investments to the tune of USD 1.5 Trillion. The country thus ‘epitomizes an untapped and fully resplendent goldmine that is fast attracting the attention of global opportunity miners’.
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 USD 25.5 Billion by early 2018, USD 35 Billion by 2020, and USD 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”, opines 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.
The Iranian Government plans to increase the capacity of its core industries within the next 10 years through a slew of measures which include but aren’t limited to enhancement of productivity through adoption of advanced technologies, focus on innovation-driven manufacturing, diversification of its economy from O&G to focus on high value-adding downstream segments, increased contribution of medium and high technology manufacturing to overall manufacturing.
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.
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% of the total GDP; it is forecast to reach more than 16-18% by 2025.