FDI in Iran soars with sanctions relief – Financial Times

Economic rebound as country climbs regional FDI rankings

June 20, 2016, by: Cara Lyttle

Data from fDi Markets, an FT service that monitors cross-border greenfield investment, shows that before the lifting of sanctions, Iran was ranked 12th out of the 14 Middle East nations for FDI between January 2003 and December 2015, equating to a market share of 1.62 per cent.

Since sanctions were lifted this year, Iran has climbed to number three in the rankings, with a market share of 11.11 per cent, placed only behind regional powerhouses the United Arab Emirates and Saudi Arabia.

Lifting sanctions will unfreeze billions of dollars of overseas assets and allow oil to be sold internationally; a restriction that has cost Iran more than $160bn in oil revenues since 2012. Despite holding the second largest gas and fourth largest crude oil reserves globally, Iran has flagged behind other emerging Middle Eastern countries.

Global investment into Iran has been steadily increasing since 2013, a year in which the country attracted just three FDI projects. This increased to eight in 2014 and nine in 2015.

It was in the first quarter of 2016, however, that the impact of sanction relief became evident. Iran won 22 FDI projects during the quarter, the highest rate of investment since fDi Markets began recording data in 2003.

Job creation and capital expenditure also rose between 2013 and 2016. Some 352 jobs were created in 2013 with capital expenditure of $79m, rising in 2014 to 2,732 new jobs and capital expenditure of $1.67bn.

Although 2015 showed a 48 per cent increase in capital expenditure overall, the first quarter was notable in failing to attract any FDI projects, in stark contrast to the same period this year.

Predictably, Tehran attracted 36 per cent of recorded investments into the country during the first quarter of 2016, and 40 per cent of all FDI into Iran since January 2013.

Projects Capex $m* Jobs
Q1 2016 22 3,489 5,376
2015 9 2,473 541
2014 8 1,670 2,732
2013 3 79 352
Source: fDi Markets *includes estimates

Since the sanctions were lifted the leading sector for investment into Iran has been financial services, which has attracted four investments from separate companies with capital expenditure of $60m.

The country has also attracted investments from the automotive sector, business services, consumer electronics and textiles, among others.

The principal countries investing in Iran during the period were South Korea and Germany, which together committed to capital expenditure of $2.15bn.

South Korea-based steel producer Pohang Iron and Steel (Posco) has been the single largest investor in Iran this year, with plans to invest $1.6bn to build an integrated steel mill in the Chabahar Free Trade-Industrial Zone by March 2017. The company’s subsidiary Posco Energy also said it had entered a memorandum of understanding with Iran-based PKP to build a 500 megawatt off-gas power plant (using gas generated during steelmaking) nearby.

The upward trend recorded by fDi Markets suggests the economic rebound Iran is experiencing is set to continue. Nineteen investors signalled an interest in future investments in the country, representing an increase of 90 per cent from 2015.

Cara Lyttle is a research analyst at fDi Intelligence, an FT data service.



Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s