IPF 2000 is a historic opportunity for all of us to take our roles beyond the defined frameworks

Ali Ashraf Afkhami is the chairman of Petrochemical Industries Investment Co. (PIIC). Studying both engineering and management and long service to the industrial sector have provided Afkhami with a vision on the necessity of privatization in the petrochemical industry. His statements reveal his concerns on globalization and privatization:

IPF 2000 is held concurrent with the advent of a new century as well as a new millennium. The world is rapidly changing and all visible walls and borders are disappearing one after another. Satellite waves have penetrated all fronts. Continents and countries have grown ever closer. Remarkable political, social, technological and economic developments have left deep impacts on our lives.

We are well aware that geopolitics of the world greatly changed in the 20th century as a result of two world wars. New countries have emerged and regional unions have been formed. New orders have replaced the old ones. As democracy is further enhanced, people take a greater role in sovereignty and decision making to democratize the trends.

Organized economy is shifting to market economy. Factors such as the public sector, mobilization of public capitals, lowering state control and promoting the private sector’s status have become especially significant. The capital market and stock exchange are becoming more popular. Capital repatriation knows no geographical borders since overseas investment has become a usual practice. Establishment of stock exchange organizations, investment institutes, insurance companies and banks together with the utilization of modern methods has facilitated foreign investment.

Attaching further importance to product quality, lowering the final price, increasing the market share, presenting new products for different tastes have all led to a very tight competition among international companies. Survival in the presently competitive market depends on research and development to present modern products and shorten the time needed to turn an idea into a product available in the market.

However, what matters the most is that the striking progress of technology will continue. Developments in science, approach, behavior and relations will continue; each enforcing their own rules of the game. Accordingly, relative advantage is replaced by competitive advantage.

With a vision of its competitive advantages, within the past decade the Iranian petrochemical sector has become a significant part of domestic economy given the fact that this sector has experienced remarkable development in the number of plants, number of products and production capacity. The number of petrochemical plants has increased from 7 to 13. At the same time, the volume of final products has raised from 2.4 million tons to 13 million tons a year, with the value moving from $33.5 million to $1100 million. Based on strategic plans so far devised, in the next 13 years the total volume of products will reach 48 million tons a year with the value of $10 billion. These developments require some $24 billion of investment.

Here, the role of investment companies in accelerating the privatization trend is undeniable. The privatization trend started in the Iranian petrochemical sector about five years ago.

• The state no longer holds shares in some plants namely Abadan Petrochemical Plant (manufacturer of PVC), Farabi Petrochemical Plant (manufacturer of PA and DOP) and Iran Carbon Plant (manufacturer of carbon black).

• Almost all of the technical and engineering services and repairs of petrochemical plants owned by the state are being performed by private companies.

• Shares of Arak, Kharg and Isfahan petrochemical plants are being gradually presented to non-governmental entities and there are instances of issuing permits for the private sector and investment companies to invest in petrochemical projects.

We believe promoting private investment in the petrochemical industry requires certain regulations that must be completely observed in the implementation phase. We need to reshape the outlook of our country’s economy. This demands using the private sector’s capabilities plus attraction and utilization of financial resources of the public in investments.

PIIC was established 8 years ago with a capital of less than $60,000. Today, the company’s paid capital has grown by 700 times to equal $43 million. Four years have passed since we succeeded in registering PIIC in Tehran Stock Exchange to enlist 30,000 shareholders.

PIIC has purchased three small petrochemical companies from the government all of which are being suitably run. In addition, the company has entered partnership with the private sector to form 5 active companies with acceptable capabilities in technical-engineering services, repair and maintenance, establishment of petrochemical plants and project management. These companies have taken a fine market share through tight competition.

PIIC has executed three new projects with about $50 million of investment in three years: Production plants for polyethylene pipes with the capacity of 11,000 tons, PVC films with the capacity of 3,000 tons and granule PP with the capacity of 50,000 tons. The latter was commissioned in late 1999 and is currently supplying the market.

A 50,000-ton project for the production of MTBE is being implemented in Bandar Imam with the investment of $14 million. Hopefully, this plant will be commissioned in 12 months. Currently, PIIC is negotiating on joint investment for production of PET at an annual capacity of 400,000 tons. Moreover, the company is directing techno-economic studies of a few projects, as follows:

• Carbon Black with the annual capacity of 40,000 tons

• VAM with the annual capacity of 150,000 tons

• PVC with the annual capacity of 120,000 tons

• Citric acid with the annual capacity of 5,000 tons

• Upgrading the capacity of existing plants (Abadan, Farabi, Iran Carbon)