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Iran business news, january 2017

This update aims to provide a summary of latest news of Iranian market during the past month. Corporations who are going to enter into Iranian market will benefit from this update.


Iranian Economy a Year after Sanctions

A year ago, Iran opened to international business after almost a decade of economic isolation, following the lifting of nuclear-related sanctions.

The implementation of the nuclear deal focused the attention of foreign investors on Iran’s huge potentials. With a young and urbanized population of 80 million (nearly two-thirds live in urban areas and 60% are under 30), Iran is the second-largest economy in the Middle East, with a GDP of $393.7 billion in 2015.

Although oil and gas remains the largest sector, Iran has diversified its economy through decades of self-reliance.

No “big bang” has happened here, but incremental developments are encouraging. These include: the reestablishment of the British Embassy in Tehran; British Airways resumes direct flights to the capital; a €5-billion agreement with Italy’s Ferrovie dello Stato to develop the rail system; and a $4.8-billion preliminary deal signed in November between the National Iranian Oil Company and a consortium led by France’s Total to develop the South Pars giant offshore gas field.

 

 

Iran's Corruption Perceptions Index Improves, Rank Drops

Iran's score based on the Corruption Perceptions Index improved by two notches in 2016 with 29 out of 100, according to a report by global graft monitor Transparency International.

Meanwhile the country’s ranking dropped by one place as it is now ranked 131 out of 176 countries. The CPI scale indicates that zero is perceived to be highly corrupt while 100 is perceived to be very clean. 

Denmark and New Zealand jointly came in first as the cleanest countries, while Somalia with a score of 10 came last, preceded by South Sudan which scored 11. According to the report, 69% of the 176 countries scored below 50 on CPI in 2016. The report also shows more countries declined in the index in 2016 compared to 2015.

 

 

Details of Iran's H1 Economic Growth Released

The government recently released the details of Iran's economic growth during the first half of the current Iranian year (started March 20, 2016).

Based on the report published last week, Iran's economic growth over the six months to September 20 stood at 7.4%. The figures for spring and summer were 5.4% and 9.2% respectively.

The GDP growth, excluding oil sector, amounted to 0.9%. The figure for Q1 stood at -0.9%, while Q2 growth without oil amounted to 2.6%, Boursepress reported.

The oil sector registered the highest increase in GDP in the period with a growth of 61.3%. A 55.4% and 67.2% growth was reached in the first and second quarters respectively. 

 

 

Iran's $1.6b Trade Deficit with Germany

Iran posted a $1.62 billion trade deficit with Germany in the nine months to December 2016. About 818,000 tons of goods worth $1.8 billion were imported from Germany during the period, registering an increase of 90.4% in volume and 38.2% in value.  Intermediate goods made up for 55.1% of overall imports from Germany whereas consumer and capital goods accounted for 22.9% and 22% respectively. Exports from Iran to Germany stood at 25,400 tons worth $179 million during the same period. About 57.7% of the exports to the European country were intermediate goods, 41.4% consumer goods and 0.9% capital goods, Mehr News Agency reported.

 

 

Iran Logistics Industry Drawing Global Attention

According to Kuwaiti logistics company Agility's latest annual report jointly conducted by Transport Intelligence, Iran has climbed more spots – eight positions to 18th – than any country in the 2017 Agility Emerging Markets Logistics Index.

The index offers a snapshot of logistics industry sentiment in a survey of supply chain executives and ranks the world’s leading emerging markets based on their size, business conditions, infrastructure and other factors that make them attractive to logistics providers, freight forwarders, shipping lines, air cargo carriers and distributors.

Iran is one of five countries added to the Index in 2017 besides Ghana, Myanmar, Angola and Mozambique, which ranked 39, 48, 49 and 50 respectively.

 

 

Iran's Non-Oil Foreign Trade Turnover Tops $70b

Iran’s non-oil foreign trade during the 10 months of the current Iranian year (started March 20, 2016) stood at $70.25 billion, indicating a 5.8% increase compared with the corresponding period of last year. 

According to the latest report by the Islamic Republic of Iran Customs Administration, Iran exported $35.27 billion worth of non-oil commodities during the period, registering an 8.37% rise year-on-year.

The country imported $34.98 billion worth of goods during the period, up 3.21% year-on-year. 

The figures point to a $288 million surplus in Iran's international trade in the 10 months to January 19, 2017.

IRICA’s data put the weight of exports and imports at 102.04 million and 27.55 million tons respectively, registering a 33.76% and 2.87% growth respectively. 

Gas condensates were Iran's main exported commodity ($6.02 billion), making up for 17.08% of the total non-oil export figure. They were followed by natural liquefied gases ($1.95 billion), light crude oil, excluding gasoline ($1.34 billion), petroleum gases and liquefied hydrocarbons ($1.06 billion) and liquefied propane ($990 million).

The imported commodities mainly included field corn ($1.16 billion), soybean ($774 million), auto parts ($666 million), motor vehicles with engine displacement of 1,500-2,000cc ($626 million), and motor vehicles with engine displacement of 2,000-2,500cc ($536 million). 

China was the main customer of Iranian products in the 10-month period as Iran exported $6.54 billion worth of non-oil goods to the Asian country, 9.53% more compared with last year's similar period. 

Other major export destinations included the UAE with $5.66 billion, Iraq with $5.39 billion, Turkey with $2.81 billion and South Korea with $2.56 billion worth of Iranian goods imported. 

Major exporters to Iran included China ($8.4 billion), the UAE ($5.48 billion), South Korea ($2.78 billion), Turkey ($2.19 billion) and Germany ($1.96 billion). Imports from China, the UAE, South Korea and Turkey fell by 1.27%, 11.47%, 8.74% and 10.99% respectively.

 

 

17 Major Shipping Lines Back to Iranian Ports

Seventeen major global shipping lines have resumed their services to Iran since the removal of nuclear sanctions, says CEO of Ports and Maritime Organization Mohammad Saeednejad. “As a result of the nuclear deal, Iran’s marine activities are now completely back to normal,” the official was quoted as saying by IRNA. Mediterranean Shipping Company, the world’s second-largest shipping line in terms of container vessel capacity, and Evergreen Line are among the top shipping lines that have resumed their cooperation with Iranian ports. France’s CMA CGM, the world’s third largest container shipping group, also called at Shahid Rajaei, Iran’s biggest container port at the mouth of the Strait of Hormuz, early August. The company teamed up with Islamic Republic of Iran Shipping Lines to share vessel capacity and jointly operate routes and marine container terminals. Most recently, Maersk Line expanded its footprint in Iran by adding a second port of call less than three months after it resumed services to the country following the lifting of sanctions. The Danish carrier, which suspended services in 2012, has added the port of Bushehr to its Iran coverage. Its service was relaunched with calls to Bandar Abbas in October.

 

 

Economic Indices Indicate Positive Developments

After years of negotiations on Iran’s nuclear program and the unraveling of financial and economic sanctions, the full implementation of the Joint Comprehensive Plan of Action between Iran and six world powers began on January 16, 2016.

Given the positive expectations about JCPOA, political, security and economic outcomes are of great importance one year after the sanctions removal.

Had the sanctions remained in place, the country was bound to face even more economic woes, a recent report by the Central Bank of Iran declared.

 

 

Iran-Russia “Green Corridor” Piloted

The Iran-Russia “Green Corridor” was piloted last week after the first shipment of Iranian agro products was exported to Russia from Abbasabad Export Terminal in western Mazandaran Province.

According to Iran-Russia Chamber of Commerce, the Green Corridor, which is aimed at streamlining customs procedures, will help lower the price of Iranian products in the Russian market by 14%, IRNA reported.

 

 

Irish Farmers Seeking Trade Facilities in Iran

Irish farmers have called on their government to reopen the Irish Embassy in Iran, which was closed in 2011.

Patrick Kent, president of Irish Cattle and Sheep Farmers Association, said there would be “huge opportunities for exports of beef and sheep meat to Iran” if full diplomatic relations were to resume between the two countries, Dublin-based Internet publication TheJournal.ie reported.

 

 

Mineral Exploration, Production on the Rise

The Ministry of Industries, Mining and Trade issued 498 mineral exploration and 527 mineral production permits during the eight months to November 20. The figures show a 5.6% and 8.7% growth respectively compared with last year’s corresponding period, IRNA reported. According to the ministry, there are over 5,400 active mines in Iran, from which close to 400 million tons of minerals are extracted every year. Iran is home to 68 types of minerals with more than 40 billion tons of proven reserves and 60 billion tons of potential reserves. According to the United States Geological Survey, Iran holds the world’s largest zinc, ninth largest copper, 10th largest iron ore, fifth largest gypsum and barite and 10th largest uranium reserves. Overall, Iran is home to more than 7% of global mineral reserves.

 

 

Chinese Apparel Reexported From Turkey to Iran

The preferential tariff agreement between Iran and Turkey has given rise to the export of cheap Chinese apparel from Turkey to Iran under the guise of Turkish brands, the head of Tehran Knitwear and Socks Producers and Sellers Association said.

 

 

34% of Iranian Saffron Sold Under Foreign Brands

Iran produces 94% of all the saffron in the world, yet it accounts for only 60% of the global saffron trade.

“About 34% of the saffron cultivated in Iran are labeled and sold by other countries,” the deputy head of the National Council of Saffron said.

“The remaining 6% of saffron production take place in Greece, Afghanistan, India and Spain,” Gholamreza Miri was also quoted as saying by Mehr News Agency.

According to the official, the domestic market for saffron is worth 25 trillion rials (more than $646.6 million at market exchange rate).

 

 

Tehran, Baku Boost Transport, Trade Ties

Iran and Azerbaijan are boosting trade and transportation ties, following the new agreements reached during a joint intergovernmental commission held in Baku and Nakhchivan last week.

The two sides agreed to reduce transit fees to $100 from the current $160 for each truck crossing the common border, Mehr News Agency reported, quoting Mohammad Javad Atrchian, an official with Road Maintenance and Transportation Organization affiliated to Iran’s Ministry of Roads and Urban Development.

 

 

Stanford Project Studies Iran’s Economic Development

Anew research initiative at Stanford is bringing together experts to create independent data-driven analysis on the current state of Iran’s economy and what its future could look like.

Stanford’s Iranian Studies Program launched the Stanford Iran 2040 Project about eight months ago to conduct interdisciplinary research on economic and technical matters related to the country’s long-term, sustainable development and evaluate their possible implications in a global context.

The project is called Iran 2040 because of its forward-looking nature and focus on long-term analysis.

 

 

Delegation of Indian Rice Exporters to Visit

A delegation of Indian rice producers headed by President of All-India Rice Exporters Association Mohinder Pal Jindal are scheduled to visit Tehran on January 27 to pave the way for increased rice exports. Iran is one of the biggest consumers of rice and imports the product from India as well as Pakistan and Uruguay.  In 2015-16, Iran’s basmati rice imports from India almost halved compared with a year before to stand at $571 million, IRNA reported.

 

 

$8.5b worth of FDI in Industries Since 2013

About $8.5 billion in foreign direct investment have been made in Iran’s industrial sectors so far since Hassan Rouhani took office as Iran's president in August 2013, the minister of industries, mining and trade said.

“This total sum has been invested in 170 industrial and mining projects. So far, 80 of these projects have been inaugurated,” Mohammad Reza Nematzadeh was also quoted by IRNA as saying in a meeting with Iran’s Ambassador to Turkey Mohammad Ebrahim Taherianfard, in Ankara late-Tuesday.

"European countries, Commonwealth of Independent States and Arab countries are among those that have invested in Iran over the past couple of years."

 

 

Iran Supplies 1% of World Flower Markets

Iran exports about 7,000 tons of flowers, ornamental plants and herbal medicines annually, supplying close to 1% of the global markets, the deputy agriculture minister for horticultural affairs said.

“Around 2,200 hectares of land are currently under the cultivation of flowers and ornamental plants,” Mohammad Ali Tahmasebi was also quoted as saying by ILNA.

 

 

Iran Holds 3b Tons of Decorative Stone Reserves

Iran holds 3 billion tons of decorative stone reserves, says an executive of Iran Stones Association.

Some 16 million tons of decorative stones are extracted in Iran every year, which is far less that the 27-million-ton extraction capacity, Seifollah Arasteh was also quoted as saying by Mehr News Agency.

Many of Iran’s decorative stone mines have gone out of business due to the unfavorable economic climate facing the sector. The after-effects of economic sanctions imposed by the West on Iran over its nuclear energy program, which were officially lifted last year as part of a nuclear deal between Iran and world powers, and the restrictions enforced by the government over unprocessed mineral exports have weakened the domestic sector’s standing in the international markets.

 

 

New Tax Rates for Tobacco, Cigarettes

Members of the Iranian Parliament approved on Saturday cigarette and tobacco tax rates, as part of the sixth five-year development plan (2016-21). Based on the new law, the tax rate on locally-produced tobacco and cigarettes is set at 10%. The rate stands at 20% for local brands jointly produced by domestic and foreign manufacturers, 25% for domestically produced cigarettes with foreign brand names, and 40% for imported cigarettes and tobacco. The MPs also mandated the Ministry of Industries, Mining and Trade to announce the retail prices of cigarettes and all tobacco products to the relevant authorities for taxation purposes and for printing on cigarette packs, IRNA reported.

 

 

Joint Pharma Plant with Azerbaijan Launched

A groundbreaking ceremony for Caspian Pharmed, an Azerbaijan-Iran pharmaceutical plant, was held in Pirallahi Industrial Park in Baku on Monday.

Azerbaijani Minister of Economy Shahin Mustafayev and Iran’s Minister of Cooperatives, Labor and Social Welfare Ali Rabiei attended the ceremony, Trend News Agency reported.

Azerbaijani Deputy Economy Minister Niyazi Safarov, Director General of Azersun Holding Savas Uzan and Executive Director of the Azerbaijan Investment Company Rovshan Najaf also attended the ceremony.

In the joint plant, 49% of the shares belong to Iran’s Tamin Pharmaceutical Investment Company, while 25% go to the Azerbaijan Investment Company and 26% to Azersun Holding.

Iran’s Darou Pakhsh Holding Company signed a memorandum of understanding with Azerbaijan Investment Company and Azersun Holding in Baku on April 21, 2016. Over $30 million have been invested for the establishment of the joint venture.

The plant will be commissioned within two years. In the first stage, it will annually produce 200 million tablets and capsules, as well as 84 drugs, including essential ones for the treatment of heart diseases, contagious diseases, non-communicable diseases, as well as various types of antibiotics and painkillers.

 

 

MoU with German Firms to Expand Iranian Airports

Iran Airports Company has signed a multilateral memorandum of understanding with German companies for expansion of Iranian airports.

The agreement was signed with Munich Airports, Frankfurt Airport and Dornier Consulting International GmbH, which is a consulting and project management company that operates in the field of aviation, among other sectors, IRNA reported.

The MoU concerns airport operations management, airport development, navigation infrastructures and consultation regarding commercialization of the airports.

“This MoU gives us the opportunity to use German companies’ experience to modernize Iranian airports, equipment and facilities; train human resources and finance airport infrastructure development projects,” said CEO of the Iranian company, Rahmatollah Mahabadi.

According to the official, Iran is planning to overhaul all its airport equipment to enhance safety and security level.

Iran’s airport equipment is mostly dilapidated, which in turn is increasing maintenance costs for airports.

 

 

Kenya Eyes Tea Exports to Iran

The Kenya Tea Development Agency says it has found new market for tea in Iran following the lifting of UN sanctions. According to KTDA national chairman, Peter Kanyago, the agency will continue to expand the orthodox tea market to dislodge India and Sri Lanka that have dominated the Iranian market over the years, Kenyan news portal Daily Nation reported.

Orthodox teas are whole leaf teas produced using the traditional process and they generally fetch higher prices than those processed by the crush, tear and curl process common with black tea leaves

 

 

Turkish Exports to Iran Jump 35.6%

Turkish exports to Iran in 2016 rose 35.6% compared to the preceding year to mark the highest rise among Turkey’s export destinations, according to Turkish Exporters Assembly Chairman Mehmet Buyukeksi.

During this period, the neighboring country exported goods worth $3.69 billion to Iran, which constituted 2.8% of all of Turkey’s exports last year, IRNA reported

Tobacco exports generate the highest foreign currency income for Turkey after hazelnut exports and Iran was the biggest importer of Turkish cigarettes in 2016, followed by Bahrain and Saudi Arabia, Daily Sabah reported.


 

Japanese Agro Machinery Producer Enters Iranian Market

Japan’s Kubota Corporation introduced Diesel Motor Bakhtar Company as its exclusive representative in Iran in a meeting held with top managers of agricultural jihad organizations of Iran’s northern provinces on Sunday. “Kubota has agreed to assemble its machinery in Iran in cooperation with local parties,” the head of Automation Development Center of the Agriculture Ministry, Kambiz Abbasi, was quoted as saying by IRNA. The official added that Iran is not just importing agro machinery and equipment, and if any country is willing to export their products to Iran, the related technology and knowhow must also be transferred. Established in 1890, Kubota is a tractor and heavy equipment manufacturer based in Osaka, Japan. The company produces many products, including tractors and agricultural equipment, engines, construction equipment, vending machines, pipe, valves, cast metal and pumps, as well as equipment for water purification, sewage treatment and air conditioning. The company is listed on Tokyo Stock Exchange and is a constituent of the TOPIX 100 and Nikkei 225.

 

 

IRISL to Resume Services to France

The Islamic Republic of Iran Shipping Lines is launching a new service that will connect Iran to the French port of Le Havre.

Before nuclear sanctions, Iranian containerships called at Le Havre every week between 2006 and 2009, connecting the main Iranian ports.

The service will begin in February and be operated by HDASCO Line (Hafez Darya Arya Shipping Company), also named HDS lines, which is a specialist container carrier under the IRISL Group, according to the American Journal of Transportation.

 

 

German Molding Machine Co. Picks New Iran Agent

German manufacturer of molding machines KraussMaffei Group has appointed KaranSimaFam as its new agency in Iran and aims to strengthen its market position in injection molding and reaction injection molding machinery in the country, the German machinery supplier has announced.

Tehran-based KSF is a family-run company in the Iranian plastics industry with more than 50 years of experience, Plastics News reported.