Arvand Free Trade Zone (AFZ) located in the southwest corner of Iran, bordering Arvand River and beyond that southern Iraq has a unique proposition on offer, which differs from the other free trade zones across the country; and that is its direct access to the Iraqi market, and currently, among all of Iran’s neighboring countries, Iraq stands as the largest market for Iranian products.
The Arvand zone is located on the northern tip of the Persian Gulf and borders the Khuzestan province and the major cities of Khorramshahr and Abadan. The zone covers 8,600 hectares of land and includes administrative, tourism and commercial areas. Nearly 3,800 hectares is utilized for warehousing and shipping. The port itself boasts the deep waters of the Bahmanshir, Karun and Arvand rivers. It also has excellent road, rail and air transit, which boosts its connectedness.
As the Iranian government has begun expanding its free zones, the Arvand region is considered an excellent choice for a new business gateway bordering Iraq. It was in 2004 when the final green light was given and the area began its transformation from a rural to industrial and commercial region. Cabinet members consequently officially demarcated the area by 2005.
Transport
In recent years the free zone has become a huge construction site. New road projects in the cities of Abadan and Khorramshahr constituted to 20% of construction in the special region in the past 3 years, according to the provincial highway department. The Abadan–Khorramshahr highway, which is 15 kilometers long and runs through the zone, is the most commonly used freeway in the region.
In the maritime side, roughly 95% of imported goods and 85% of exports are transported through the zone’s port. The government has stated that the Arvand area is one of the most used transport hubs in the country and that it is necessary to further develop its port.
The Arvand zone is likely to become one of the main entry points of goods travelling around the region via Iraq. In addition, passing through the zone considerably cuts transit times, regarding alternative routes like the Suez Canal, which is another major entry point into North Africa and Europe.
Air transport is also another major area of connectivity. Abadan airport is the main air terminal in the area, boasting state-of-the-art facilities, including a 1,000-meter-long runway plus another 800-meter one. The airport is equipped with the latest aero-navigation equipment namely ILS and DVOR. It connects to major cities in Iran and other free zones like Kish Island further down the Persian Gulf.
In 2013, some $176-million worth of commodities were exported to Iraq via the free zone, according to the managing director of the free zone, Mehdi Nikpay. He added that some $102-million worth of commodities were exported to Iraq in 2012. And the figure for the end of the Iranian year 1393 (ending March 20, 2015) is expected to far surpass the two prior years. Household goods are extremely popular products for export, as the cost of Iranian products is far cheaper compared to western commodities exported to neighboring Iraq.
Educational Hub
The Aras zone authorities also intend to build the region’s credentials as an educational center for the oil and gas industry. Companies like NIOC and others have actively recruited new graduates to create a new generation of experts to run the bustling and strategically important Abadan refinery. Mehr Arvand, an engineering group based in Tehran and Abadan has also highlighted the benefits of working in the oil and petrochemical sectors. They offer courses for young people in the TAFE system, based in Australia, to teach them about the developments in the industry. Academic qualifications include bachelors, masters and doctorates.
Investment Opportunities
The Aras free zone offers a plethora of incentives to bring in the punters, which include the ability for international banks to open branches in the area, favorable conditions for foreign investment, Arabic language business services, cheap industrial warehousing, special conditions for new start-up businesses, and land acquisition policies in favor of foreign ownership. The zone has made every effort to professionalize its environment for foreign businesses, especially Iraqi and Kuwaiti, which in recent years have marked the zone as a relatively well-situated safe haven for investments. It also offers foreign businesses with a great opportunity to access the Iranian market, which is hungry for foreign products.
Recently the Aras zone signed an MoU with Vietnamese officials. Doan Duy-Khuong, vice-chairman of Vietnam’s chamber of commerce said last week during a visit to the zone that the agreement seeks to take advantage of the favorably-located site, according to Iran Daily. He said friendly relationship between Iran and Vietnam has prepared the ground for expansion of bilateral trade ties and investment. Vietnam, as one of the first foreign countries interested in entering the zone, will be given complete access to the area and will also be offered relaxed visa procedures for future trade delegations. The Vietnamese official said Iran and Vietnam have a unique opportunity for cooperation in export and imports of agricultural products, processing industries, clothing and shoes as well as oil and gas products.
Many other countries have also shown their willingness to invest in the zone. So far, it has been made public that Austrian, Chinese, Thai, Turkish, Iraqi, Kuwaiti and Qatari investors among others have made their initial trips to the valuable zone to scope out how they too can invest in the mini-region. It has to be said that the majority are looking at the petrochemical industry as the mainstay of income, but as time progresses these countries along with others are likely to look at investing in other areas as well.
Other projects underway in the free zone include four new petrochemical plants which began construction in February. The estimated cost of the projects was said to be around 622 billion rials ($25 million). The plants, once operational, will produce various types of thinner, paint, glue, anti-freeze and solvents. The estimated capacity of these new plants would be 78,000 tons of chemical compounds and petrochemicals per year once fully operational, said Esmail Zamani, the director of the zone, as reported by IRIB.
Analysts in Tehran suggest that the future of the free trade zone is expected to radically transform if western sanctions against the Islamic Republic are removed, as negotiations continues between Iran and the six world powers known as the P5+1 in a bid to resolve a decade-long dispute over Tehran’s nuclear energy program. With Arvand being the main gateway to Iraq, Iran and beyond, the prospects for this little parcel of land may explode with enterprise if things continue on their current path.
