Economy, Domestic Economy

Transportation at Forefront of New Investment Climate

Transportation at Forefront of New Investment Climate Transportation at Forefront of New Investment Climate

The transport sector in Iran is expected to be one of the main beneficiaries of the landmark nuclear agreement reached with the P5+1 countries –namely the US, Russia, China, France, the UK and Germany- and the subsequent lifting of sanctions.

Once the Vienna agreement is implemented, Iran will gain immediate access to billions of dollars in frozen assets, which will free up resources for public spending on infrastructure. In addition, Iran will regain access to SWIFT and the international banking system, which will considerably improve project financing for infrastructure.

The Business Monitor International research group, in its 2015 report on Iran's infrastructure sector, forecasts that the removal of financial sanctions will facilitate project financing and attract foreign investment into Iran's transport sector. The report, however, warns that structural weaknesses in the Iranian economy and operational hurdles such as bureaucracy, lack of transparency and weak institutional framework could present obstacles to foreign investors.

Iran's transport sector is catering to the needs of a population of 80 million and the business needs of an economy potentially worth $417 billion. Despite government ambitions to attract investment in road, rail, air and sea transport to meet the needs of a rising population, there has been little activity in the past five years. Therefore, investments are expected to target the sector in the post-sanctions era.

Among the most significant developments, a $10 billion investment plan in public transport for the next five years was announced by the municipality of Tehran in May 2014. According to Hojjat Behrouz, assistant to the deputy mayor for transportation, more than 70% of the investment will be allocated to Tehran's existing metro to double its network coverage to 300 kilometers.

> Railroads  to Lead Transport Investment

Iran's railroad system is expected to be a key beneficiary of investment. Unlike a number of other Middle Eastern nations, Iran has a railway system which carries not only passengers but also freight. Iran's railroad network handles approximately 25% of the total freight transported in the country. There is a total of 8,442 kilometers of railroad track, of which only 148 kilometers is electrified.

A number of railroad infrastructure projects have been announced that will connect Iran to other countries, thus offering increased access for rail freight. Work is underway on a railroad to connect Iran with Iraq and the country is developing its freight transport relations with the landlocked states of Central Asia, with plans to launch a container train route between Almaty in Kazakhstan, Tashkent in Uzbekistan and Istanbul in Turkey.

> Port Infrastructure Development

Bandar Abbas is the country's major southern port, handling about three quarters of the 20 million tons of cargo that pass through Iran's Persian Gulf ports each year. Smaller ports at Bushehr, Bandar Lengeh and Chabahar have also assumed greater importance in recent years. In addition, the Caspian ports have benefited from Iran's attempts to develop its relations with the Central Asian republics.

The Caspian ports of Anzali and Amirabad, in the north, are to undergo major capacity upgrades to double their loading and unloading capacities, according to the head of the Iranian Ports and Maritime Organization, Ata'ollah Sadr. The port of Anzali will increase its cargo-handling capacity from 8 million tons per year to 16 million tons. Amirabad, which is already Iran's largest Caspian Sea port, will expand from a 5-million-ton capacity to 10 million.

The country's ports are still limited in their capacity, as the majority is only able to service 100,000 ton vessels. This has forced Tehran to ask ships to dock at the main UAE ports, such as Dubai's Jebel Ali, so that goods can be loaded onto smaller ships and sent to Iran. Iran is expected to start developing better and more autonomous port infrastructure on the back of the lifting of sanctions.

> Plans to Expand Airports

Iran has a total of 319 airports, of which 140 have paved runways. It has yet to develop a significant tourist sector, with airports mainly used by business travelers. Airports also serve the country's freight sector, although air transport makes only a small portion of total freight transportation.

There are plans to expand the main airports, with Iranian Airports Holding Company looking to attract in excess of $1 billion in investment into the aviation sector. A significant expansion project is the Imam Khomeini International Airport in Tehran, which is to be tripled in capacity to 20 million passengers a year, before hitting its peak capacity of 90 million passengers per annum.

> Need to Develop Roads

BMI forecasts the rapidly increasing number of cars to place a strain on the country's road infrastructure. The report forecasts a 35% growth in car sales in 2015, partly as a result of some imports recommencing. In addition, the country's roads must take the brunt of most of the freight transported within its borders. Roads made up 70% of freight transported in 2014 and this is expected to grow to 74% in 2018.

Iran currently has a total of 198,866 kilometers of roads, of which 160,366 kilometers are paved, while the country boosts 1,948 kilometers of expressways. Iran's road network links it with its neighbors: the 2,500 kilometer A1 highway runs from Bazargan on the Turkish border, across Iran, to the Afghan border in the east. The A2 links the Iraqi border in the west to Mirjaveh on the Pakistani frontier.