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A Simple Question,
No Simple Answer
Mohammad-Mehdi
Navab, Ph.D., majored in metallurgical engineering from Hanover University and served for
five years as the Islamic Republic of Iran’s Ambassador to Germany. Afterwards, he
spent sixteen years working as the deputy minister of economic affairs & finance and
president of the Organization for Investment, Economic & Technical Assistance of Iran
(OIETAI). You can see him in numerous pictures shaking hands and exchanging MoU’s
with foreign delegates.
Each of Dr. Navab’s famous handshakes led to a foreign investment in the country that
was not widely known as very investor-friendly in those years.
Dr. Navab’s moving out of OIETAI while Iran was set to obtain a better position in
foreign investment risk ranking was unexpected, to say the least. However, his vision and
experience make him a very likely candidate to hold decisive capacities in various sectors
namely the newly-established Ministry of Industries & Mines.
After stepping down from his government post, Dr. Navab addressed an association of
Iran’s industrial and economic executives. A compilation of his address follows:
Foreign
direct investment will bring in technological progress, management competence and a share
of the global market |
If Iran fails to pave the way for absorption
of this investment, by the end of the Third Economic Development Plan, the country will be
overburdened with a jobless population of 9 million. A severe unemployment will result in
a severe underdevelopment and decline of living standards. Investment must today be
referred to as a task in Iran; otherwise, the Third Development Plan is facing serious
challenges on its way.
A Problem of Unpredictability:
Iran is one of the few countries with unpredictable economic situation given the fact that
she is going through a phase of “trial & error” to establish a new system.
This new system prompts a non-discriminatory enforcement of regulations be it in terms of
taxation or customs, etc. Let us note that a “non-discriminatory behavior toward
all” is an essential necessity in the international community and we cannot possibly
justify to them why a certain group or institution enjoys an exemption from duties.
Attracted So Far: Since
1994, OIETAI has registered 110 cases of foreign investment in Iran, the amount of which
reaches about $2.7 billion. These investments have been made in the sectors of
agriculture, food industry, leather processing, textile, chemicals, electronics,
transport, and telecommunications.
Exclusive of the oil and gas sectors, Iran has
been able to attract $470 million of foreign investment between March to October 2000.
This figure stood at $415 million for the same period in 1999. Processing of wool and
herbal extracts, steel and compressor production are some of the fields in which Iranians
attracted foreign investment in year 2000. These numbers are exclusive of foreign debts
labeled as “finance”.
Behind Pakistan:
Following the victory of the Islamic Revolution, many claimed that foreign investment in
Iran is contradictory to Law 81 of the Constitution. However, no official statement was
ever issued by any of the authorities to nullify the Law for Attraction and Protection of
Foreign Investment.
Due to a lack of transparent policies on
foreign investment, Iran has constantly been forced to resort to various ways and means
for attraction of foreign investment. Examples of this practice were several agreements
signed between Iran and different countries to encourage and protect foreign investment in
our country. These agreements must be approved by the Parliament and the Guardians
Council, as a routine practiced throughout these years. But the result of all these
efforts has been attraction of some $2.6 billion in the last decade. In the same period,
the amount of foreign investment attracted was $287 billion in China and $5 billion in
Pakistan.
Are We Keeping up?: Considering national interests, governments
of developing countries must devise their policies in a way that would enable them to take
advantage of foreign investments. The world’s total amount of foreign investment in
1999 reached $865 billion which showed $200 billion of increase as compared with 1998.
This figure is expected to have tapped $1,000 billion in year 2000. Statistics indicate
that the foreign investments made worldwide in year 2000 were three times more than the
total of those made in 1995. Only in 1999, the United States attracted $275 billion of
foreign investment.
Supporting a Law: Due to
the large amounts of capital needed, the government or the private sector in Iran cannot
afford to invest in various sectors and that is why effort must be exerted for attraction
of foreign investment.
Access to advanced technology, gaining market
share and improvement of management capabilities are some advantages of attracting foreign
investment. Today, if we aim to present our products on the international market, we have
to establish partnerships with those who have a share in the global market.
The Law for Attraction and Protection of Foreign Investment is not enough for absorbing
foreign capitals in Iran. Therefore, it is essential that this law be supported by tax
regulations, the Labor Code and anti-monopoly rules.
Foreign Direct Investment:
During the First Development Plan, Iranians received heavy loans from foreign sources to
buy machinery and implement several projects. However, after being imported, some of these
machinery were not unpacked since buyers said they ‘had lost motives to implement
projects’.
Foreign direct investment is not associated
with any of these problems. The country won’t be indebted, we will acquire
technological capability and management competence and at the end, we will be able to
secure a share of the global market.
A New Proposal: Despite
all the existing problems, the government has so far been unable to propose to the
Parliament a comprehensive decree for attraction of foreign investment. Therefore, this
time members of the Parliament took up the matter themselves and drafted a proposal which
was approved unanimously in the first hearing. The second hearing will soon take place and
I hope that this time, the instructions for attraction and protection of foreign
investment won’t be aborted like they were previously. I once again stress that the
final ratification of this law will be truly effective if accompanied by amendments to
taxation and labor codes. |
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