Incentives for Foreign Investors in Iran’s Tourism Industry

Iranian speakers highlighted the high potential of tourism sector in attracting foreign investment that can help reduce Iran’s oil dependency and boost the economy by creating jobs and generating revenues.  

First Vice President Es’haq Jahangiri, the head of Iran’s Cultural Heritage, Handicrafts and Tourism Organization, Masoud Soltanifar, and other high-ranking officials addressed the International Conference on Investment in Tourism Industry held in Tehran on Sunday.

Thirty-two companies from 17 countries, namely France, Germany, Italy, Spain, Portugal, Hungary, Croatia, Canada, the Dominican Republic, Canada, Turkey, the UAE, Azerbaijan, Pakistan, China, South Korea and Singapore, also participated in the two-day event.

Gholamheydar Ebrahimbay Salami, secretary of the conference, said the event is aimed at assisting major international companies invest in post-sanctions Iran.

He added that a major goal of Iran’s tourism authorities is to ensure equitable national development, earn income, promote social justice, eradicate poverty and protect the environment and national resources, while maintaining the country’s cultural identity.

 “100 Hotels, 100 Businesses”

The official also pointed to the “100 Hotels, 100 Businesses” scheme as one of the few plans in Iran with a clearly defined manifesto and 40 maxims devised in cooperation with the officials of 31 provinces.

The scheme, which was unveiled at the end of the conference, outlines 174 projects to be introduced to investors interested in hotel construction.

Soltanifar, Iran’s chief tourism authority, stressed that Iran is ideal for investment, thanks to its sustainable security, political and social stability, proper economic and social infrastructure, low-cost factors of production, vast market, favorable rules and regulations, considerable attention to the private sector by the government and the law on supporting foreign investment.  

The 10% growth in the number of Iran’s inbound tourists since the lifting of western sanctions, which is more than twice the global average, indicates the country’s flourishing tourism market.  

Based on data from the World Travel and Tourism Council, the direct share of domestic and foreign tourism in Iran’s gross domestic product equaled 7.6% in 2015.

Soltanifar hoped that the figure will reach 9% by the end of 2016.

ICHHTO has made plans to build 300 four- and five-star hotels within five years in cooperation with the private sector that has initiated the construction of more than 170 hotels so far.

According to Soltanifar, over 1,750 tourism projects are currently underway in Iran, 820 of which are one- to five-star hotels and hotel apartments with 10-90% progress.

Over 100 projects, which are more than 50% complete, have received a total of 9.7 trillion rials ($277 million) in the form of loans from the National Development Fund of Iran as well as banks’ resources.

The total budget required to complete the 1,750 projects has been estimated at $10 billion, which require $5 billion in loans from domestic and foreign entities in the next five years.

The ICHHTO chief said that the scheme for creating 70,000 jobs in tourism and 70,000 in the handicrafts sectors by 2017 also requires $1.1 billion.

Soltanifar outlined the government’s major plans to develop tourism as follows: Passing laws to facilitate investment, creating brands, promoting new types of tourism such as sports, climate and industrial tourism, developing knowledge-based human resources, creating a comprehensive system of standards, balancing inbound and outbound tourism by improving political relations and creating a system for the protection and restoration of historical and natural sites.

The first vice president also referred to the country’s huge potential for the development of tourism services and the favorable conditions created for investment following the lifting of sanctions.

Jahangiri pointed to new laws that will ease investment in the sector and make it profitable, and stressed that in spite of Iran’s rising tourism revenues, the government is keen on attaining greater achievements.

  Foreign Inquiries

A number of participants posed questions to officials attending the panel, including Minister of Roads and Urban Development Abbas Akhoundi, Deputy Economy Minister Mohammad Khazaei, Governor of the Central Bank of Iran Valiollah Seif and the head of Social Security Organization Taqi Nourbakhsh.

Christophe Landais from France’s Accor Hotels that has initiated investment in Iran with Ibis and Novotel hotels, Louay Sarrage from the Dubai-based Roda Hotels, Gonzalo Alcaraz from Spain’s Martinon Company, Tony Soh from Singapore’s Ascott Company specializing in hotel apartments and Hamid Keshaei, a representative of Iran’s private sector, made enquiries from the panel.

Their questions concerned hotel pricing policies, land allocation, tax exemptions, the government’s policies regarding the development of rail, air and road transportation for the next decade, labor force and regulations on employment of foreign workforce, the role of National Development Fund of Iran in hotel development, sections within ICHHTO to be contacted for assistance, the government’s flexibility in licensing hotel apartments and the possibility of changing the license of residential buildings into service buildings, the government’s plans about credit cards, the need for a single window for handling administrative affairs, municipalities’ cooperation with investors and bank loans.

  Responses

The minister of roads and urban development said the government aims to complete the country’s air fleet restoration plans by 2025.

“The country requires a fleet of 500 aircraft, including short-range planes for regional flights, as well as medium- and long-range planes,” he said.

Akhoundi noted that although Iranian air travel has improved since the lifting of sanctions and there are now direct flights to most capitals, Iran’s share of the global air travel is still less than 10% and must be increased.

Referring to pricing in air travel, the official said price liberalization has been enforced for a year and air ticket costs are now determined by market demand.

Saeid Shirkavand, ICHHTO’s deputy for investment, said the free pricing system is slated to be initiated soon.

There are also plans to renovate the country’s 60 airports, of which 10 are operating beyond their capacity and 50 below their potentials due to the absence of a regional flight network.

With regard to railroad systems, the government is pursuing two main objectives: connecting railroads to suburbs and establishing links with Asian countries. Transit-oriented development is also another focus of the ministry.

Akhoundi stressed that except for certain buses, there is no set pricing for trains and buses.   

“The change of property use from residential to lodging is welcomed in city centers but has to comply with the standards of the comprehensive urban plans in suburban and residential areas,” he said.

The deputy economy minister pointed to the law on supporting foreign investment approved by the Majlis, which offers full guarantee against all non-commercial risks.

“Foreign investors need not be concerned about the transfer of capital and profits overseas, as it is guaranteed by the government in the form of a law,” Khazaei said, adding that the guarantee will offer protection.

According to the official, since March 2015, warranties for foreign investment exceeding $9 billion have been issued.  

Khazaei noted that the Foreign Ministry is tasked by the same law to issue three-year extendable residence permits for foreign nationals involved in investment projects.

“The National Development Fund of Iran is ready to offer loans but investment through personal capital is more welcome,” he said.

Based on Iranian laws, no foreigner is allowed to own property in Iran, but the foreign investment law allows the ownership of land once an applicant registers a company in Iran.

“Even if the company totally belongs to them, they can possess the required area of land because the business has been registered in Iran,” he explained.

Besides, all activities in the fields of hospitals and tourism can enjoy 100% tax holidays for periods of between three and 13 years, depending on the region.

Khazaei referred to credit regulations saying that thanks to negotiations with the European Union and the world’s credit rating agencies, Iran’s sovereign risk has decreased from seven to six and is expected to reach five within a few months.

The governor of the Central Bank of Iran assured foreign investors about easy and quick transfer of money.

Seif said part of the budget for projects can be provided from domestic resources, including the National Development Fund of Iran, but greater equity can facilitate the procedures.   

“We have had negotiations with international credit card companies in Japan, China, Russia and Europe, which are about to be finalized soon to allow the use of credit cards by foreign travelers in Iran,” he said.

Another measure helps switch domestic cards with those of neighboring countries, such as Azerbaijan, Russia, Iraq, and Pakistan and other willing states.

“The issuance of credit cards worth $3000, $8,000 and $14,000 by CBI for Iranian travelers can also help boost the domestic sector,” he said.

The head of Social Security Organization pointed to the goals and achievements of SSO and its tourism holding company, domestically known as HEGTA, and its potential to involve foreign investment.

Nourbakhsh also said that the Ministry of Cooperatives, Labor and Social Welfare offers work and residence permits to foreign workers as well as SSO insurance coverage.  

In another panel, Iran introduced investment opportunities and legal assurances that facilitate and guarantee profitable businesses. Foreign participants also gave presentations offering their proposals for the expansion of tourism sector in Iran.

The foreign representatives were positive about the prospects of Iran’s international ties and the growth of its tourism sector.