SOLID FOUNDATIONS

Iran 2013 | ECONOMY | INTERVIEW

TBY talks to Mohammad Reza Farzin, Chairman of the Managing Board of the National Development Fund of Iran (NDFI), on the country's plan to reduce its dependency on oil and gas revenues by investing in a variety of sectors domestically and abroad.

Mohammad Reza Farzin
BIOGRAPHY
After receiving a PhD in Economics from Allameh Tabatabaie University in Tehran, Mohammad Reza Farzin went on to become Manager of Planning at Bonyad-e-Mostazafan & Janbazan. In 2008, he assumed the positions of Spokesperson and Secretary of the Distribution Advisory Council for the Economic Transformation Plan and Advisor to the Minister of Economic Affairs and Finance. He has also been a Member of the Board of Directors of the Bank of Agriculture since 2010 and has been Chairman of the Board of Directors of the National Development Fund since June 2012.

The National Development Fund of Iran (NDFI) recently allocated $14 billion in order to boost oil production. How can this investment enhance Iran's oil and gas sector?

The NDFI's resources come from the export of oil and gas. In 2011, 20% of total oil and gas revenues were transferred to the NDFI. This figure will increase to 23% for 2012. Our aim is to reduce the country's dependency on oil and gas revenues. Following the foundation of the NDFI, the government began transferring a portion of oil and gas revenues to the fund. All of the funds should be used either for investing abroad or for enhancing local market development. Regarding the $14 billion investment, we decided to allocate a large share to the oil and gas sector. In fact, $5 billion will be used for the development of five phases of the South Pars gas field. This initial outlay is expected to herald further investments in South Pars. The next step for us is to further develop the downstream industries of the oil and gas sector, and we have plans for both greenfield and brownfield petrochemical projects. The oil and gas sector is an important pillar of development for Iran, and in 2012-2013 we will allocate a large portion of our foreign revenues to the petrochemicals industry. We aim to reduce the country's dependence on crude oil revenues. To achieve this goal, we have to substitute crude oil sales with value-added products. The NDFI provides finance for short-, medium-, and long-term projects in the oil and gas industry.

The NDFI is one of the basic pillars of growth in the country. How would you evaluate the achievements of the fund since its establishment in 2011?

Since its foundation, the fund has financed some 300 projects in foreign currencies. We are currently financing five refineries, 13 steel companies and aluminum production facilities, 10 power plants, 10 pharmaceutical companies, 13 petrochemical companies, and nine cement factories. In total, $13 billion has been allocated to different projects in many domestic sectors. In 2005, our cement production capacity was so small that we had to import most of what we needed. In 2012, not only are we meeting all of the domestic demand for cement, but we are also a significant exporter, and we are looking to expand into new markets. This is the result of the sufficient and successful financing of cement projects in the country. With regard to our power plant production capacity, we have the highest in the region and our electricity production is 70,000 MW. This means that we surpass Turkey and we export electricity to several other countries. Developing more power plants is our other project. We are now investing indirectly in projects to increase capacity and enhance the potential for production, aiming to fulfill the ambitious projections of the fifth Five-Year Development Plan.

Which sectors of the Iranian economy are in need of further investment attention?

Our main priority is the oil industry, since both upstream and downstream activities are the main pillars of the economy. There are also other sectors we believe need additional investments, such as agriculture and the steel sector. We believe that these areas have high potential, and we have foreign markets for both of them. Our other priority is to finance technical and engineering projects abroad.

“We welcome any appropriate investment opportunity either in the region or inside Iran."

You plan is to invest a portion of your resources abroad. Which regions are you targeting?

We provide financial services for projects and seek investment opportunities. We welcome any appropriate investment opportunity either in the region or inside Iran. Good opportunities lie in the financial markets of the region, especially in Central Asia and South Asia. We are studying these possibilities, and in the near future we will enter these markets and make investments. We aim to invest primarily in the capital markets and the oil and gas sector, both domestically and abroad. We are pursuing deeper penetration into the financial market, and by ameliorating economic relations with neighboring countries we can create a better financial environment.