Foreign direct investment in Iran
[3] Foreign investors have concentrated their activity in a few sectors of the economy: the oil and gas industries, vehicle manufacture, copper mining, petrochemicals, foods, and pharmaceuticals.
[11][12] The largest amount of foreign investment was in the industrial sector, including food and beverage, tobacco, textiles, clothing, leather, chemical, steel and oil derivates.
[14] According to the United Nations Conference on Trade and Development (UNCTAD), foreign direct investment (FDI) in Iran hit a new record in 2010 and surpassed 3.6 billion dollars despite sanctions imposed on the Islamic Republic.
In 2012, the provinces of Fars, Gilan, Tehran, Kerman, Mazandaran and West Azerbaijan ranked first to sixth place in attracting foreign investment in the country.
[22] Among developed nations, the most active investors have been Germans, Norwegian, British, French, Japanese, Russian, South Korean, Swedish, and Swiss companies.
Danone of France, Nestlé of Switzerland and Coca-Cola and PepsiCo of the United States have joint ventures with Iranian companies.
TotalEnergies, Equinor, Shell, Gazprom, and LG of South Korea have been active in Iran's natural gas industry.
Alcatel of France, MTN Group of South Africa and Siemens of Germany gained major telecommunications contracts in 2004 and 2005, respectively.
[23][24] The international companies are drawn by what could become the largest market in the Middle East, with nearly 80 million people, a majority of whom are under 30, well-educated and tech-savvy, and by the country's energy potential.
[27] According to United Nations Conference on Trade and Development, Iran ranked sixth globally in 2010 in attracting foreign investments.
Iran stands 96 in terms of business start, 165 in getting permits, 147 in employment, 147 in registering assets, 84 in getting credits, 164 in legal support for investments, 104 in tax payment, 142 in overseas trade, 56 in feasibility of contracts and 107 in bankruptcy.
The country has the advantage of a broad domestic industrial base, technology an educated and motivated workforce, cheap labor and energy resources and geographical location, which gives it access to an estimated population of some 300 million people in Caspian markets, Persian Gulf states and countries further east.
General laws and regulations regarding foreign business in Iran could be regrouped under the following categories:[35] In 2006, Iranian citizens abroad's net worth was $1.3 trillion.
[40] According to the Civil Code, foreign nationals will, subject to the existence of a treaty on reciprocity, enjoy the same rights and privileges of Iranians.
[42] Provisions of the 2002 Act entitled Foreign Investment Promotion and Protection Act (FIPPA) include:[35] For the first time, project financing schemes such as buy back agreements and BOT projects (only under an operator status) are specifically covered under the foreign investment law.
[45][46] First and foremost, it is crucial to realize that Iranian authorities insist on a long-term commitment and a transfer of technology as a requisite for getting a share in the market.
Many Iranian companies, especially those in the private sector, are currently actively seeking joint-venture partners both to fill their technological as well as management gaps.
Should a company decide to adopt this approach to the market, it is advisable to look for products and services that have both domestic demand as well as regional export potential.
If a joint-venture company can earn hard currency through export of its goods, it will not be too dependent on the Iranian banking system for the repatriation of profits and dividends.
In August 2010, the 25% ceiling set for joint venture companies in enjoying facilities from the foreign exchange reserve account has been eliminated.
Buyback contracts in the oil sector, for instance, were arranged in which the contractor funded all the investments, and then received remuneration from the National Iranian Oil Company (NIOC) in the form of an allocated production share, then transferred operation of the field to NIOC after a set number of years, at which time the contract was completed.
Following the end of the Iran–Iraq War in 1988, Iran faced a major problem: it needed foreign investment if it did not want to lose its vital income from the oil and gas industry, yet its revolutionary ideology and Constitution forbid granting "concessions".
Under Note 29 of the said plan, the Iranian government is allowed to employ "buybacks" in its effort to meet the industrial and mineral needs in connection with exports, production and investment.
Put in laymen terms, a buy-back transaction is a method of trade where plants, machinery, production equipment and technology is supplied (by a domestic or foreign private firm), in exchange for the goods that will be produced directly or indirectly by means of such facilities.
[51] In 2013 Iran also announced for the first time since the Iranian revolution of 1979, the offering of production sharing contracts (PSCs) for the most complicated and difficult projects, such as deep-water wells in the Caspian Sea (the details of which will be revealed in December 2015 in London).
