Despite its huge economy and central position in the world oil and gas market, Iran remains somewhat of a mystery to most investors. However, statistics alone reveal why Iran is such a compelling destination for investment. In PPP-adjusted terms, the IMF estimated that Iran had a GDP in 2009 of some $828 billion, making it the world’s 18th largest economy, while in nominal GDP terms it comes in at 28th with $326 billion. The country managed to shrug off most of the effects of the global economic crisis, with annual growth managing to stay above 2%. Prior to this period growth came in at a healthy average of 5.6% per year from 2005/06 until 2008/09. Although Iran possesses some of the world’s largest oil and gas reserves, it is actively attempting to diversify its economy and place more stress on the output of its growing industry and service sectors.
Iran has also conducted one of the most effective and wide-ranging privatization efforts seen in the region in recent years. The privatization program, which was accelerated in 2006 and backed by a decree from the Supreme Leader, aimed to cede 80% of the government’s shares in state-owned enterprises (SOEs) in all sectors except for the upstream oil and gas sector and the defense industry to private sector players, and shrink the state’s share of the economy from 65% to 20%. In 2010, more than 300 SOEs were announced for privatization, including petrochemical companies, refineries, power plants, air carriers, banks, insurance companies, car manufacturers, mines, and agri-food industrial complexes. The Iranian Privatization Organization has been put in charge of the sell-off process, and has used a blend of block stake sales and IPOs on the Tehran Stock Exchange to move ahead with the sales.
Encouraging more foreign investment is also seen as a core part of the economic reform process. The Iranian government sees foreign investment both as a mechanism of financing development and as a means of technology and knowledge transfer. Further steps have been taken to facilitate foreign investment into the country in 2010, the most important of these being the removal of the three-year lockup on invested capital, and the provision of Central Bank guarantees for access to hard currency for the repatriation of funds. With these regulations, the country aims to further increase foreign investment, which reached $10 billion in 2007, and FDI, which stood at $3 billion in 2009, an 88% increase compared to 2008. Iran has also arranged a series of generous “tax holidays” for private foreign investors who engage in activities considered a high priority for development.
The Iranian economy is being developed in broad terms using the “Vision 2025” plan, adopted in 2005 to guide the reform process, as well as the Five-Year Development Plans (FYDPs)that the government sets out. In March 2010, the Fourth FYDP ended and the Fifth FYDP was being carefully scrutinized by Parliament. The new plan will continue the agenda of economic reform, by sustaining efforts at privatizing SOEs and broadening the country’s economic base. In order to support economic diversity, the government will increase its research budget to 3% of GDP, and encourage more active collaboration between business and the university sector.
With more than 5,000 years of continuous history, Iranian society has a rich set of cultures and traditions that very few other societies can claim. In addition, the country has a young and steadily urbanizing population: 65% of the population is under the age of 30 and 68% lives in urban settings. With 3 million students currently studying at its universities, Iran has one of the highest education attainment rates in the region. Its population richness is enhanced by its ethnic diversity. The Iranian population is made up of Farsi people, Azeris, Kurds, Baluchis, Lurs, Turkmens, and Arabs, who have lived in the same geography harmoniously for hundreds of years.
With its many natural and human assets, Iran has every reason to look to the future with hope. For the first-time visitor to Iran, the country is able to demonstrate not only the progress it has made, but also the cultural treasures it has preserved.
Iran has much to share with the international business community. Through an in-depth analysis of each sector of the economy, and interviews with leading businessmen and businesswomen in the country, The Business Year: Iran 2011 aims to introduce its readers to this unique and fascinating country.
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