Economy, Business And Markets

Factors Furthering Foreign Financing

Factors Furthering Foreign FinancingFactors Furthering Foreign Financing

Visits by several foreign trade delegations to test the Iranian waters before making investment have made news headlines of late. But what factors are taken into account by foreign firms when it comes to doing business?

Experts believe that the impact of foreign financing on the economy is conditioned by the domestic business environment. Factors such as low rate of inflation, free trade, adequate infrastructure, versatile workforce, accessibility to funds, conducive regulations and guaranteed ownership rights are key to attracting foreign capital.

A report by the research center of Iran Chamber of Commerce, Industries, Mines and Agriculture, also published in Financial Tribune’s sister newspaper Donya-e-Eqtesad, weighs the conditions promoting foreign companies’ activities in Iran in four sectors.

According to the report, removal of western sanctions would create new conditions for the country. Growth in oil exports, facilitation of overseas transactions and improvement of political relations would gain momentum once the sanctions are lifted.

However, the new climate would have two contradictory byproducts. It would either lead to economic insolvency by increasing exploitation of mineral and fossil resources, bolstering reliance on foreign currency revenues and undermining domestic production, or give rise to a robust economy by boosting domestic investment, raising production capacity, upgrading technology and management expertise, refining workforce skills and promoting sustainable development.

The report dubbed “Post-Sanctions’ Era and Foreign Companies’ Activities in Iran” proposes policies for four sectors, including infrastructures, investment directions, domestic capabilities and ties with potential investors.

  Expansion of Infrastructures

One of the key indices influencing foreign capital absorption is expansion of infrastructures. Simplifying the process of securing foreign investment and revising foreign trade rules toward export facilitation based on the experience of successful countries, better information dissemination on investment opportunities and partnership with the private sector are among the proposals of ICCIMA’s Research Center.

Experts suggest that a single window should be created in the government in the first phase to provide information and issue permits. The contribution of private sector in writing the 6th five-year development plan (2016-21) is a practical way of forging international economic collaborations.

Also, assistance in designing the contracts and business models between local and foreign entities would be among practical moves to secure foreign investment.

  Investment Directions

Based on the report, the entry of foreign entities through investment should be accorded high priority in the post-sanctions era.

Export-oriented investment, joint ventures with local entities, especially from the private sector, maintaining constructive interaction by identifying the areas of investment in the completion of industries’ value chain, particularly that of oil and gas sector, and optimum exploitation of domestic potentials are among proposals for this sector.

  Domestic Capabilities

Preparation of the private sector to foster collaboration with other countries, expansion of exports and public and private sector coordination with foreign investors are among policies that would improve domestic capabilities.

To achieve this objective, a department should be established in ICCIMA to assist foreign partnership. Educational workshops on management and finance should be held with the aim of seizing opportunities.

 Ties With Potential Investors

Encouraging the cooperation of Iranian expatriates, facilitating information dissemination on investment prospects, developing political and trade ties with potential export markets and establishing joint commerce chambers with other countries would boost links with prospective investors.