Economy, Domestic Economy

Investors’ Guide to Iran Industrial Sector

Investors’ Guide to  Iran Industrial SectorInvestors’ Guide to  Iran Industrial Sector

The Ministry of Industries, Mining and Trade has recently published a document titled “The Guide for Developing Investment and Economic Cooperation With Iran in the Fields of Industries, Mining and Trade.”

The guide, which Financial Tribune and its sister publication Donya-e-Eqtesad managed to preview before its media release, is aimed at introducing the country’s investment opportunities to foreign investors and state the terms and requirements as well as the contractual frameworks for absorbing foreign investments in the new economic climate expected after the prospective lifting of sanctions imposed by the West over Iran’s nuclear energy program.

  Ministry Policies

Following an introduction of the capabilities and global standing of various sectors of Iran’s industries (Tables 1-4), the guide outlines the ministry’s policies in attracting foreign investment and the outlook envisioned for the industries.

The ministry’s main goal is to develop the capabilities of the country’s industries in exporting goods and services, especially to the vast regional markets, by getting access to modern industrial technologies and absorbing foreign investment.

The guide also maintains that the country aims to undertake the temporary import of goods for reexporting them with added-value after processing it.

The document emphasizes the ministry’s firm stance on implementing global, free trade policies through interaction and cooperation with foreign enterprises to empower Iranian producers to compete in international markets.

Cooperation with international banks and foreign financial institutions to obtain short- and long-term facilities required for expanding industrial, mining and trade activities is also high on the ministry’s agenda.

The guide further underlines the industries’ need for expert opinion to enter the global market, as the ministry seeks “special investments for developing professional marketing at par with international standards and expert foreign consultation.”

  Investment Opportunities

The investment guide has outlined 17 industrial, mining and trade priority areas for investments in mining exploration, exploitation, metals and metal production, extraction of non-metallic minerals, petrochemicals and refineries, chemicals, polymers, cellulosic products, food industry, pharmaceuticals, textile and clothing, electricity and electronic devices, household appliances, machinery and industrial equipment, medical equipment and automobiles in a descending order.

The Industries Ministry has placed mineral exploration and exploitation at the top of its investment priority list as, according to statistics released by the ministry, only 7% of the country’s mineral-rich areas have been explored.

By possessing 68 types of minerals, Iran ranks 10th in the world in terms of mineral diversity.

Exploring mineral-rich zones for copper, phosphate, nickel, bauxite, precious and semi-precious minerals is one of the six investment priorities in the field of mineral exploration. Furthermore, mechanized exploitation and extraction of coal, potassium, magnesium, bauxite and iron ore offer the main opportunities.

Chromium and manganese concentration was the first priority in the metals and metal products section, followed by the processing of sludge containing gold, silver and selenium in anode copper production process, titanium processing, gold concentration, production of gold bars and polysilicon, rare elements extraction, magnesium extraction from dolomite and silver, cadmium and cobalt extraction from lead and zinc wastes in a descending order.

The mining list continues with the extraction and processing of non-metallic minerals, starting with salt extraction from Urmia Lake.

Moving down the list, converting gas to propylene and polypropylene is the first priority in the field of petrochemicals, which is followed by production of food grade hexane is the first in chemicals; polymeric alloys in polymers; paper pulp from agricultural and recycled waste in cellulosic products; dextrose, maltose and fructose in food industry; active pharmaceutical ingredients in pharmaceuticals; indigo dyeing in textile and clothing; high efficiency transformers in electricity and electronic devices; low-energy air conditioners in household appliances; polishing and cutting tools with micro-diamond and nano-diamond covers in machinery and industrial equipment; disposable medical and dental devices in medical equipment; and establishment of a permanent international expo in the trade section.

Furthermore, 30 potential projects for absorbing foreign investment are named in the industrial groups of autos, shipbuilding, mining, base metals, petrochemicals, textiles and cellulosic products.

The ministry had previously introduced 329 investment and entrepreneurship opportunities back in September and 215 more in the last Iranian year (ended March 20, 2015)

  Investment Requirements

Three requirements for foreign firms’ presence in the Iranian economy are stated in the guide.

First, the investors are required to export at least 30% of the goods produced in the country; second, the manufactured products need to be of high quality, capable of competing in international markets; and third, the foreign firms should allocate part of their capital to research for developing the technological and technical capabilities of Iranian industries.

Moreover, the guide enumerates the suggested contractual frameworks for foreign firms vying to enter Iran. The six frameworks include memorandum of agreement, licensed production, BOT (build-operate-transfer), BOO (build-own-operate) and PPP (public-private partnership) contracts for infrastructural projects such as electricity, road, railroad and telecommunications development, and technology transfer agreements.