Domestic Economy

Tehran, Tokyo Zero In on Investment Pact

Tehran, Tokyo Zero In on Investment PactTehran, Tokyo Zero In on Investment Pact

Foreign Minister Mohammad Javad Zarif said a bright future lies ahead of Iran-Japan relations.

Zarif made the statement in a joint press conference with Japan’s Foreign Minister Fumio Kishida who arrived in Tehran for a two-day visit at the head of a 23-member delegation.

The visit is aimed at concluding a mutual investment pact on development of infrastructure, oilfields and trade.

According to a joint statement released by the two ministers, Iran and Japan agreed to redouble their efforts for prompt implementation of the historic nuclear deal reached between Iran and world powers back on July 14.

The two sides also pledged to create a council for intergovernmental talks on partnerships in transportation, environment, healthcare and other fields, the statement read.

The Japanese delegation's visit comes on the heels of a meeting between Iranian President Hassan Rouhani and Japanese Prime Minister Shinzo Abe on the sidelines of the United Nations General Assembly in New York late September.

“I am more than happy to make my second visit to Iran since November 2013, when I met with Foreign Minister Mohammad Javad Zarif,” Kishida told Iran newspaper prior to his visit.

He hailed the Iranian foreign minister for his patience and perseverance in clinching the nuclear deal with world powers dubbed as "Joint Comprehensive Plan of Action”.

Referring to President Rouhani’s call for foreign investment, the top Japanese diplomat said, “Iran, the country of 80-million with rich oil, gas and natural resources, enjoys high potential for investment and economic trade with foreign countries. The Japanese government would support companies that intend to expand their activities in Iran.”

Tokyo has been interested in working with Tehran to develop Iranian oilfields for the past two decades and at one point, in 1996, had a nearly 75% stake in the southern Azadegan fields through Inpex, a Japanese oil company.

That investment gradually dwindled over the years, but Japan still had a considerable 10% stake in Azadegan until 2010, when it was forced to pull out of Iran under pressure from the United States as sanctions were tightened.

In a better economic environment, Iran could become a stable oil supplier to Japan.

“Up until now, energy was at the core of two countries' economic ties and it will continue to take center-stage in the upcoming discussions, but I do not view Iran as a mere oil supplier,” Kishida said.

It should come as little surprise that better ties between Japan and Iran are framed predominantly around energy security issues. Japan, after all, remains highly dependent on foreign sources of energy, especially from the Middle East. Last year, more than 80% of Japan’s crude oil imports came from the region.

Japan is one of Iran’s oldest and most trusted trade partners. For most of the past decade, non-oil exports to Japan have hovered around half a billion US dollars annually. Imports from Japan reached a record $1.37 billion in 2009-10, with engine parts for large vehicles constituting the largest share, according to Tehran Chamber of Commerce, Industries, Mines and Agriculture. Including oil, trade balance between the two countries has consistently been skewed in Iran’s favor. The main non-oil export commodities are chemicals, carpets and aluminum.

In August, Hiroyuki Ishige, the chairman of Japan External Trade Organization, otherwise known as JETRO, accompanied by a 30-strong trade delegation traveled to Tehran and met with Mohsen Jalalpour, head of Iran's Chamber of Commerce, Industries, Mining and Agriculture.

“Japan's economy is completely controlled by the private sector, and hence, Japanese firms are highly experienced in privatization,” the Japanese official said then.

Ishige called on Iran to tackle obstacles hindering growth and development of bilateral ties, such as cumbersome bureaucracy and issues related to intellectual property rights.

"Japan seeks to cooperate with Iran in auto manufacturing, food production and environmental cooperation," he said, adding that representatives of Japan's top economic players such as Mitsubishi and Suzuki are ready to hold talks with Iranian firms to strike cooperation deals.

Jalalpour said ties between Tehran and Tokyo must go beyond the traditional cooperation between large, state-owned firms and move toward bringing small- and medium-sized enterprises into the spotlight.

Pointing to Iran's strategic position in the region and its trade potential, the Iranian official said, "In trading with Iran, Japan has to consider the 400-million-strong markets that it can gain access to in the region. And Iran, with the safety and security it offers to investors and foreign firms in a turbulent region, can act as the region's main trade hub."

According to Jalalpour, oil, gas, petrochemicals, tourism, telecommunications and information technology sectors as well as auto manufacturing and mining machinery, are some of the potential areas for bilateral trade and cooperation.

Trade with Japan suffered more than other developed East Asian countries during the sanctions regime, which can be ascribed to Tokyo’s closer alliance with the US.

Japan had a strong presence in the 15th Tehran International Industry Exhibition—one of the largest industrial fairs in Iran—which was held last week.

According to JETRO, 18 Japanese companies took part in the exhibition, more than three times as many as last year. A total of 477 domestic and 315 foreign companies participated in the four-day annual event.