Executives find obstacles in Iran
By Guy Dinmore in Tehran
Financial Times (London)
June 27, 2000
Marmalade and cornflakes. Finding them in Iran, quipped the leader of
a British trade delegation, is the main challenge facing the foreign investor.
But beneath the diplomatic bonhomie of an after-dinner speech by Sir
Jeremy Hanley, chairman of the British-Iranian Chamber of Commerce, the
tough message being delivered this week by visiting executives is that
Iran may have great potential, but also a long way to go to attract significant
amounts of foreign investment.
John Hill, chairman of British Arab Commercial Bank and co-head of the
trade mission, said the delegation of 17 companies had so far found plenty
of goodwill. "But we feel they are not totally aware they are operating
in a global market and have to compete for foreign investment with many
emerging countries," he said. There is a spirit of change in Iran
but sooner rather than later they have to get their minds around a package
of incentives."
As Sir Jeremy pointed out, the pressures on Iran to open up are unavoidable.
About 50 per cent of the 62m-strong population is under 20 and the country
needs to create 800,000 new jobs a year. Unemployment is more than 15
per cent.
Steve Kesler, executive director of Billiton, said the mining sector
seemed to be reforming quicker than others but a constitutional ban exists
on giving mineral concessions to foreign companies. Billiton is interested
in Iran's copper and zinc but does not know if it could hold a majority
stake in a joint venture, such as that it recently acquired in China.
"We are trying to make the government aware that the world has
many investment opportunities," he said.
Foreign businessmen resident in Tehran voice common complaints. These
include a punitive and inconsistent tax regime, difficulties with visas,
lack of copyright protection, a rigid labour law that discriminates against
employers, excessive bureaucracy and corruption.
Income tax is levied at more than 80 per cent and exit visas to leave
the country are not granted unless payments are up to date. Iranian economists
say trade and investment figures are unsurprisingly bad.
Last year, Iran attracted only $1.1bn (£720m) in direct foreign
investment, down 10 per cent from 1998. Non-oil exports in the first two
months of this year fell by a third.
Mr Hill describes British-Iranian trade as "bumbling along".
Last year, two-way trade fell 25 per cent to £281m, putting Britain
sixth on the ladder of Iran's trading partners within the European Union.
Iran's own place in the world league table is also slipping, its dependence
on oil vulnerable to market changes. Recent statistics show Iran's world
ranking, according to the United Nations Human Development Index, was
97th in 1998, down from 78th in 1995. Progress in life expectancy and
literacy was offset by low incomes. Iran's own Welfare Organisation says
12m people live below the official poverty line.
The pro-reform administration of President Mohammad Khatami has launched
an ambitious five-year plan to confront Iran's economic malaise. But analysts
question whether his political opponents, with vested business interests,
or his own leftwing supporters are ready to do away with extensive subsidies.
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