Economy, Business And Markets

Gov’t Pushes Ahead With FDI Campaign

Gov’t Pushes Ahead With FDI Campaign Gov’t Pushes Ahead With FDI Campaign

Investors have expressed optimism at the prospect of Iran’s economy opening up. In a recent report, Renaissance Capital looked at the economic advantages of the country for foreign investors. The global investment management firm found Iran particularly attractive because of its combination of “Turkey’s demographics, Thailand’s GDP, Vietnam’s wages and Canada’s oil reserves.”

The report is just one drop in a rapidly expanding sea of investor reports on Iranian market’s vast potentials. In another example, a portfolio adviser at Charlemagne Capital told Financial Times: “Iran has a $106 billion market cap, $100 million daily turnover and very advanced settlement, trading and custody systems. You won’t find another closed market anywhere else in the world with those characteristics.”

The government of President Hassan Rouhani has been pursuing a foreign policy aimed at attracting foreign direct investment to revamp stalled infrastructure projects and blow wind back into domestic productive capacity and the stock market. The ability to attract FDI instead of short-term and speculative investment flows will be one of the main tools with which the government plans to legitimize extensive relations with the West.

Over the past two years, Iran has been actively trying to construct demand for foreign capital–a socio-political process that has set optimistic tone for reports like Renaissance Capital’s.

Implicit in all these reports is the PR success story of President Hassan Rouhani and his government in profiling Iran to global investors as an attractive location. For global investors, the Islamic Republic went from being a state apprehensive of global capital and foreign ownership to a hospitable, business-friendly climate in a matter of years.

Part of this story goes back to the legislative changes aimed at making foreign ownership and capital inflows easier. Many of these formal rules have been enacted over the past decade, notably under the aegis of the Foreign Investment Promotion and Protection Act. This act places no restrictions on capital repatriation, investment volume or shareholder percentage. Additionally, Iran has launched various free economic zones where business can be wholly owned by foreigners.

Indeed, many European countries, China and India have expressed their will to continue developing bilateral ties regardless of the formal outcome of the deal in Washington. This would mean that a US Congress vote against the nuclear deal could matter less than generally expected. In other words, Iran has turned a diplomatic victory into a substantial victory for the country’s economy, without the need for US legal changes.

Rouhani’s conciliatory position with the West has also caused tourism to pick up, aided by renewed interest in the West for Iran’s historical wonders. This expanded interaction with Iran is already bearing fruit.

Founder of New York-based Greylock Capital Management recently visited Iran. He plans to invest in the country soon, not only because he was impressed by Iran’s economic infrastructure, but also because he believes the government’s bid to reenter the global economy “seems to be something they want to do for real,” according to Bloomberg.  

Iranian businessmen and expatriates who mediate between the outside world and Tehran have also been very effective in changing foreign investors’ perceptions of Iran. Take the America-born chairman of Turquoise Partners, Rouzbeh Pirouz, for example, who over the past two years has relentlessly advocated the government’s willingness to invite global capital to a plenitude of influential foreign media and newspapers.

If FDI is to flow into the country, it will be due to the economic infrastructure and legal framework as well as President Rouhani’s diplomatic discourse that has managed to convince foreign capital that Iran is the right place to invest.