Domestic Economy

Iran, Japan Sign Investment Pact

Iran, Japan Sign Investment PactIran, Japan Sign Investment Pact

Iran and Japan signed a bilateral investment pact on Friday aimed at giving Japanese firms a helping hand, as foreign competitors jostle for access to the resource-rich country.

Japan's Foreign Minister Fumio Kishida signed the pact with Iran’s visiting Minister of Economic Affairs and Finance Ali Tayyebnia during a ceremony at the Foreign Ministry in Tokyo, The Japan Times reported.

Tokyo “will make efforts to further expand Japan-Iran economic relationship” by improving the business environment for Japanese firms operating in the country, Kishida told reporters earlier Friday.

With the lifting of western sanctions on Iran, Japanese insurance companies will be able to issue policies covering trade deals involving Iran. Japanese businesses will also be able to focus on making new investments in Iran’s oil and gas sector.

Tokyo lifted sanctions on Iran last week, falling in line with major world powers after the International Atomic Energy Agency confirmed that Tehran had fully taken steps to place temporary limits on its nuclear program. The confirmation marked the official end of western sanctions against the Islamic Republic.

> Protection for Japanese Firms

The investment pact includes protections for Japanese companies investing in Iran as well as their assets. It will also help improve regulatory transparency, Nikkei Asian Review reported.

The report added that the Japanese government plans to seek parliamentary approval during the current Diet session in the hope of implementing the pact this summer.

According to The Wall Street Journal, the treaty will set the terms for future investment and trade by laying out options through international mediation.

Staying in Japan on a three-day visit which started Wednesday, Tayyebnia met with his Japanese counterpart Taro Aso on Thursday.

"The problem with Japanese industries, especially its auto sector, is the high-end prices, which has effectively eroded Japan's competitive edge vis-a-vis Chinese products," he was quoted as saying by IRNA during the meeting.

He called on Japanese firms to take advantage of cheap energy and labor in one of the biggest markets in the region to make its products more competitive.

Aso said Japan is ready for transfer of technology and joint investments in Iran's infrastructure projects.

Tayyebnia also held a meeting with Japan's Prime Minster Shinzo Abe, during which the premier revealed that a Japanese economic delegation is due to visit Iran next week, Mehr News Agency reported.

Abe himself is considering an Iran visit, according to the Japanese media.

> Determined Not to Fall Behind

Japan is determined not to fall behind its rivals and hopes the pact will eventually lead to higher auto exports and greater participation in the development of Iranian oilfields, Japanese officials said.

“Japan is already late to return to Iran, but there are still countless opportunities,” Fereidun Fesharaki, chairman of energy consultancy FGE, told a packed room of officials from Japanese companies such as electronics group Hitachi Inc. and automaker Nissan Motor Co. on Wednesday.

According to The Wall Street Journal, Chinese President Xi Jinping's Iran visit last month, during which a series of economic cooperation agreements, included a deal to finance the construction of a high-speed railroad. This has heightened a sense of urgency in Tokyo.

Japanese businesses, many of which have a long history in Iran, hope to revive operations there. Suzuki Motor Corp., Nippon Steel & Sumitomo Metal Corp. and oil company InpexCorp are among those seeking opportunities.

As Japan and China are vying to build high-speed railroads in Iran, Tayybnia said developing Iran's rail and road networks is at the top of the government’s priorities.

He said Iran is suffering from chronic water shortages and is seeking Japanese investment and assistance in water purification projects in the Persian Gulf and in irrigation, The Nikkei reported.

In an interview with the newspaper on Thursday, the Iranian minster called on Toyota Motor and other Japanese automakers to actively invest in Iran and transfer their technology. He said he wants to see Japanese automakers invest in Iran as much as or more than their French rivals.

French automakers have rushed to strike major deals, with Peugeot planning to form a 50-50 joint production venture with Iran Khodro, an Iranian automaker.

Renault is expected to forge a similar alliance with SAIPA, another Iranian carmaker, "maybe within this month", the Iranian minister said.

One possible target for Inpex, Japan’s biggest oil developer, is Iran’s Azadegan Oilfield, one of the world’s largest untapped fields. Inpex held a 75% stake in the field before withdrawing in 2010 due to the US sanctions.

China National Petroleum Corp. stepped in after Inpex left, but Tehran reportedly scrapped the tie-up with China. Inpex is considering bidding for the field in partnership with western majors such as Total SA or Royal Dutch Shell PLC.