Iran is a strong, growing economy. It experienced significant recovery in 2016 as a result of sanction relief. GDP growth in the six months to March 20, 2017 reached 7.4 percent. The boost in growth was largely a result of the oil sector’s bounce-back, in both production and exports, following the removal of sanctions in January 2016 through the Joint Comprehensive Plan of Action (JCPOA).
With some recovery in foreign direct investments, Iran’s economy is expected to experience strong growth, around 4–5 percent per annum until 2021 – twice the global average. However, the growth rates can be much higher (up to 10 percent) if all the remaining constraints are lifted. Along with obvious commitment to further development of the oil & gas sector, the Iranian Government is strongly focused on structural reforms, aiming to significantly increase the non-oil share of the GDP. The major driver of this change is the “industrial goods” sector, particularly “metals & mining”. The Iranian government and IMIDRO are striving to minimize risks and improve attractiveness for international investors in the sector.
To streamline sector activities, Iran’s government created the Mines and Mining
Industries Development and Renovation Organization (IMIDRO) to be in charge of implementation of the sector growth plans.
IMIDRO is working on further improvement of the country’s investment climate to promote FDIs in the metals & mining sector. The first step was introduction and implementation of the Foreign Investment Promotion and Protection Act (FIPPA).
With the introduction of FIPPA, Iran has offered confidence and support to foreign investors. The features and advantages of FIPPA create the opportunity for foreign investors to tap into Iran’s wealth and resources:
- No restrictions on percentage of foreign shareholding and ownership
- Registration of an Iranian company with 100 percent foreign capital
- Full repatriation of principal capital, dividend and profits
- Equal rights and treatment with that accorded to local investors
- Permission and opportunities to invest in all areas that are available to the private sector
- Granting protection coverage to all foreign investment schemes
- Prompt approval of the foreign investment application
A set of further incentives have been introduced:
- Special tax-free zone for mining investments
- Flexibility: long-term contracts in exchange for low energy prices (natural gas)
- Access to raw materials from local mines
- Support for local partners with financing from the “Iran Oil Fund”
- Overall, there is a need for further market restructuring and transparency building. Having been initially set up as a sector regulator, IMIDRO is currently playing two roles: both regulator and active market player. Going forward, the government might need to rethink IMIDRO’s functions so it is not perceived as a competitor to independent market players.
1. Ambitious yet achievable plans over the next 10 years
In the post-sanction period, the Iranian government has charted a strategic 10-year plan to boost its metals & mining production across the key commodities by 2025. The plan suggests a two-to-five-times increase in the production of steel, iron ore, zinc, copper, aluminium and gold.
To achieve the above production levels across key commodities by 2025, the sector requires another USD 20 billion in investments across the metals & mining value chain. Iran is very active in attracting foreign financing. Many international companies have recently visited Iran and signed investment-related Memorandums of Understanding with the government entities.
Figure 1: Iran`s plans to boost its production
Figure 2: Signed investments-related MoUs with government entities by international companies