During the last decades, there were not any significant FDI flow to Iran. Why? What is the reason behind the lack of appropriate investment in recent years and what is going to change this situation? The outlook of FDI to Iran depends to which factors?
Of course sanctions against Iran was the main reason for having a quiet small amount of foreign investment during recent years and everyone who knows about Iran and it`s opportunities for investment without any doubt believe that sanctions were the main factor for lack of foreign direct investment. On the other hand, the Iranian government hasn’t considered this issue seriously and they haven’t had a certain plan for attracting foreign investment but now with lifting of sanctions the government finds it necessary to attract foreign investment in order to speed up the process of development in the country. The trend of FDI to Iran has shown in the graph below:
With lifting of sanction Iran will be open to international world and undoubtedly there are lots of opportunity available for those who are interested to invest in. According to the minister of economic affairs and finance, Iran is seeking 45 billion dollar in foreign investment after lifting of sanctions. Ali Tayebnia added that he expects 15 billion dollar of foreign direct investment during the next Iranian calendar year (20th March 2016). He also believes that strategic location of Iran, economic stability and more than half of population under age 35, make Iran rich in terms of resources and attractive place for foreigners to invest in. In the graph below the amount of FDI to the countries in the region in 2013 has shown and as it is obvious from the graph, Iran has the lowest FDI in 2013.
Sanctions affected FDI inflows to Iran (2013)
The most important point is Iran is not seeking for any investment leading to more import to the country but looking for investment in infrastructure and technology instead. The main target of this strategy is to boost production and increase export. The government in recent years has tried to reduce the dependency to oil and focus on revenue from tax, tourism, agriculture and some other alternative sources of revenue instead and these are all sectors which need investment and there are lots of potential in them. Therefore, as the government wants to switch its revenue from oil to other sectors, it is clear that the easiest and costly efficient way to develop other industries rather than oil is to attract foreign investment. To summarize, regarding the view of Iranian officials and also evidences, it is expected that FDI to Iran will rise in coming years with lifting of sanctions and political and economic stability.