Dubai will soon become the third
economic hub for Iranian expatriates. Studies carried out by the Economic
Department of the Ministry of Foreign Affairs show that Iranians have
transferred $12 billion worth of capital to Dubai during the past two years.
Investors who transfer their capital from Iran to the other side of the
Persian Gulf mention investment insecurity, as well as problems related to
bank interest rates and facilities as the main cause for the transfer.
Extensive publicity by housing agencies
in Dubai that has not only been aired in news networks ran by Iranian
expatriates, but have also found their way into domestic media, has prompted
Iranian capitalists to change their money into dollars and take it to Dubai to
purchase residential flats there. Iranian buyers of real estate in Dubai
mention suitable infrastructures and existence of creditable educational
centers with the best facilities as the main reason why they had purchased
real estate and transferred their capital there.
Alireza Salari, former Iranian
Ambassador to the United Arab Emirates wrote in his report about situation of
Iranian investors in Dubai that “... selling real estate in Dubai is a ready
ground for absorbing the capital of Iranians due to existence of suitable
infrastructures regarding education and IT while social calm, and lack of
factional and political conflicts has doubled willingness of Iranians to take
their money there.”
“In addition to Iranians living in the
country, Iranian expatriates from across the world, some of whom cannot
directly work in Iran due to political problems, take their capital to a
region which is similar to the Iranian society to get a sense of proximity to
In another part of his report, Salari
noted that “... problems resulting from instability of project management in
Iran, arresting investors, inattention to time factor in implementing big
projects and extreme caution exercised by domestic directors when implementing
projects are major reasons for capital flight from Iran.”
The main reason for the success of real
estate companies in Dubai was taking advantage of creditable consultancy and
contractor companies for the implementation of projects. To encourage
investors, the government must pave the way for investment in free zones and
other parts of the country where national projects are being carried out. At
the same time, taking advantage of foreign consultants for implementing
projects can prevent capital flight while absence of needed infrastructures
for attracting capital to the country is a big problem that discourages
investments in Iran.
Despite all the publicity for
encouraging participation of the private sector during the past years, total
investment in the country has fallen. Meanwhile, a comparison between
investment in Iranian free trade zones and Dubai indicates a wide gap between
the two regions. Iranian investors that consider Dubai a safe place for
investment have made purchasing real estate their first target. They believe
that purchasing flats or residential units will provide a good base for their
children. At the same time, the government of the United Arab Emirates has
eased regulations and investment conditions.
Foreign investors who came to Iran
during the past years were discouraged due to the cold welcome they received
here and found the United Arab Emirates a much better place for investment.
Their investments drew other investors to the United Arab Emirates. The United
Arab Emirates, especially Dubai, will soon turn into an Iranian society. The
place is probably the third country accepting Iranian immigrants and will
register a new record in absorbing Iranian capital and immigrants. That record
previously belonged to some states of the United States of America as well as
Canada, which have now been overtaken by Dubai. Though the powerful role of
media cannot be ignored in this regard.
Statistics show that projects in which
Iranians invest in the United Arab Emirates are collectively worth $500
million to $1 billion. Each month, Iranian air travel agencies conduct 1,000
flights to the Untied Arab Emirates. How else could we justify this high
number of monthly flights?
More than a decade ago the government
incurred heavy costs to establish free trade zones in Iran in order to prevent
capital flight. However, austerity and inefficient laws made investment
uneconomical despite the 13 years that have passed since the establishment of
the said zones.
At the same time, some sources have even
opined that based on economic rules, Iranian free trade zones encourage
capital flight. Economic experts believe that attracting foreign investment
and preventing flight of domestic capital would need adequate investment
grounds inside the country. A prerequisite for doing so is to provide
investment security and reduce economic risk. Although various figures have
been produced on Iran’s investment risk by various international bodies, there
is no doubt that political instability and behavior of international community
toward Iran will have a direct effect on the process of taking more capital
into the country.
The wealthy Arabs say that “capital is
shy” and for this reason, before investing in any kind of project, investors
should be assured about the destiny of their investments.
Geographical location of Iran and having
common borders with 15 countries is a God-bestowed bounty that must be used to
the best effect. At the same time, provinces must assume a more active role
and be delegated higher sovereignty rights to attract investments from
domestic and foreign investors. Perhaps this will be a last-ditch effort by a
government, which has already lost previous opportunities. If such concerns
were addressed properly by sectoral documents and the Fourth Economic
Development Plan, the future could be promising.