The CEO of Turquoise Partners, one of the core intermediaries in the private sector between Iran and the international community, has warned that foreign investors still face hurdles when they want to enter the country. Turquoise Partners, which is considered a pioneer in managing foreign assets on the Tehran Stock Exchange (TSE), manages at least 90% of all foreign investment in Iran’s capital market.
In a lengthy interview with Eghtesad News in his company’s modern and airy office, Ramin Rabii said: “With regards to the challenge of foreign investment, unfortunately there are plenty of problems, ranging from the lack of our managers’ acquaintance with the foreign investment standards, to an array of complex and obstructing laws.”
At the very basis, foreigners are not even able to enter the domestic banking system, due to the hole in banking regulations that only allows those with national identity card to open a bank account.
Nevertheless, Rabii believes that the country has made great strides forward over the past ten years. He stresses his company’s role as lever over domestic financial institutions such as the TSE.
Turquoise Partners, an equity fund and brokerage firm, was established in 2005 with the specific aim of easing and assisting foreign investors interested in Iran.
“It even used to be problematic for foreign companies to make a positive return on their shares. We have put a lot of effort in convincing domestic firms that TSE-listed foreign investors should receive their stock returns on time.”
On the other hand, foreign investors might experience a culture of business clash when cooperating with Iranian firms. Rabii argues that large Iranian firms in particular “are sometimes not even ready to hold a meeting with their foreign investor.” This business culture should change, the CEO believes: “any investor who is interested in an Iranian firm will first want to take a closer look at its activities; they will want to know the managers and the structure of governance in the firm.”
Despite the plentitude of obstacles remaining, Rabii is optimistic that the legal and logistical infrastructure will change once sanctions are lifted. “The majority of hurdles facing foreign investors are due to the fact that the TSE’s financial system is not connected to the world,” he noted.
Isolation from global financial markets means that domestic firms and investors are much less acquainted with the basic framework in which foreign investment should take place. Rabii asks rhetorically whether the infrastructure is there to accommodate a large, sudden influx of foreign capital. “I imagine that the Central Bank of Iran (CBI) would be shocked by the explosion of demand from foreign investors if the sanctions were to be removed.”
In the case sanctions are lifted, the CBI would also have to change its perspectives on financial transactions. “If a foreign investor came in with $200 million and made a quick return of $200 million, and then for whatever reason wanted to withdraw the total of $400 million from Iran, would the Central Bank be prepared to allow him to take out the money and leave”
Foreign investors, particularly from Europe, can’t wait to enter the Iranian market, as the largest frontier market in the world, according to Rabii.
“Therefore, institutions like the Securities and Exchange Organization and the Central Bank should prepare themselves now for an influx of demand once sanctions are lifted and the doors of Iran’s economy open to foreign investors.”
