Domestic Economy

Iran Plans to Emerge as Regional Transit Hub

Iran Plans to Emerge  as Regional Transit Hub
Iran Plans to Emerge  as Regional Transit Hub

Thanks to its strategic location, Iran has the potential for acquiring a substantial share of international transit, provided infrastructures are established.

According to Deputy Minister of Roads and Urban Development Ali Nourzad, Iran has 10,171 km of railroads, 2,316 km of freeways, 15,000 km of highways and 20,000 km of roads, the new portal of the Construction and Development of Transportation Infrastructures Company—affiliated with the Ministry of Roads and Urban Development—reported.

"We’ll witness a major overhaul once the under-construction 4,731 km of railroads, 1,116 km of freeway, 4,500 km of highways and 3,000 km of roads are added to the transport infrastructure of the country," he said.

Nourzad added that over 1,100 km of freeways and more than 3,000 km of railroads are ready for investment and the groundwork for involvement of investors has already been prepared.

Iran's railroad system is expected to be a key beneficiary of investment. Unlike a number of other Middle East states, Iran has a railroad system that carries not only passengers but also freight. Iran's railroad network handles approximately 25% of the total freight transported in the country.

A number of railroad infrastructure projects have recently been unveiled, which will connect Iran to other countries and facilitate rail cargo transportation.

Work is underway on a railroad to connect Iran with Iraq and the country is developing its freight transport links with the landlocked states of Central Asia, with plans to launch a container train route connecting Almaty in Kazakhstan, Tashkent in Uzbekistan and Istanbul in Turkey.

Road infrastructures are also in a dire need for development. According to the Business Monitor International's research group, the rapidly increasing number of cars places a strain on the country's road infrastructure.

The group forecast a 35% growth in car sales in 2015, partly as a result of some imports recommencing. In addition, Iran's roads take the brunt of most of the freight transported within its borders. Roads made up 70% of freight transported in 2014 and this is expected to grow to 74% in 2018, the BMI said in a report.

Iran's road network links it with its neighbors: The 2,500-kilometer A1 highway runs from Bazargan on the Turkish border, across Iran, to the Afghan border in the east. The A2 links the Iraqi border in the west to Mirjaveh on the Pakistani frontier.

The Ministry of Roads and Urban Development says $80 billion worth of businesses are up for grabs in Iran’s transportation sector.

Despite government ambitions to attract investments in road, rail, air and sea transport to meet the needs of a rising population, there has been little activity in the past five years. Investments, therefore, are expected to target the sector in the post-sanctions era.

"With detailed planning and tapping into the domestic and international potential, the stage is set for the development of transit and transport infrastructures, now that western sanctions against Iran are a thing of the past," Nourzad was quoted as saying.

The transportation sector is known to directly fuel economic growth. During 1959-2014, it averaged 6.3% of Iran’s gross domestic product. Its average share in GDP even grew to more than 7% in the last 10 years.

"Iran’s transportation indices from mid-90s to mid-2000s show that the country has not been able to develop the sector based on objectives set in the third, fourth and fifth five-year development plans," Hamid Azarmand, economic expert and former deputy head of National Iranian Productivity Organization, said.

“Figures show that the domestic transportation sector is far behind what is necessary to achieve high growth rates and that it does not meet international standards,” he said.

BMI forecast that the removal of sanctions will facilitate project financing and attract foreign investment into Iran’s transport sector.

The group, however, warns that structural weaknesses in the Iranian economy and operational hurdles such as bureaucracy, lack of transparency and weak institutional framework could present obstacles to foreign investors.

According to Deputy Minister of Roads and Urban Development Amir Amini, Iran plans to boost its goods transit capacity to 38 million tons by 2021, 30 million tons of which amount will be transported via roads while railroads will make up the rest.

A total of 7.89 million tons of oil and non-oil goods crossed Iran’s 32 borders during the eight-month period ending November 21, director general of Transit and Border Terminals Bureau said.  

“The transit of 3.56 million tons of oil-based goods and 4.32 million tons of non-oil commodities were recorded over the period,” Mohammad Javad Atrchian added.

Bandar Abbas (28%), Parvizkhan (24.3%), Bashmaq (11.7%) and Bazargan (10.9%) were the most active terminals in terms of incoming transit, while Imam Khomeini Port (32.1%), Bandar Abbas (10.9%), Lotfabad (7%) and Sarakhs (6.7%) were the busiest in clearing outbound transit, IRNA quoted Atrchian as saying.