Foreign Investment in Iran: Laws and Regulations, Advantages, and Investment Opportunities

1. Foreign Investment in Iran: Laws and Regulations, Advantages, and Investment Opportunities Presentation by :Sharagim Shams Deputy Director General, Foreign Investment Office Organization for Investment, Economic and Technical Assistance of Iran (OIETAI) On the occasion of UBCCE Third Business Forum

2. Presentation Highlight 1.General Information about Iran -Fundamental Macroeconomic Reforms - Privatization 2.Foreign investment in Iran : Policies, Laws and Regulations and advantages

3. General Information about Iran

4. Geography Location: -Middle East, bordering Iraq,Turkey, Pakistan, Afghanistan and Turkmenistan t Oman Sea and the Persian Gulf from south and the Caspian Sea from north, -Strategic location on the Persian Gulf and Strait of Hormuz, which are vital maritime pathways for crude oil transport

6. Area: 1.67 million km² Population: 71.5 million Literacy ratio: %85 30 Provinces

8. Climatic Characteristics: Numerous Diversity Mid Summer Climate Factor North of Iran South of Iran Temperature (c) Min: 5 Max: 50 Humidity (%) 70 10 Rainfall (mm) 165 0 Mid Winter Climate Factor North of Iran South of Iran Temperature (c) Min: -28 Max: 31 Humidity (%) 90 20 Rainfall (mm) 1200 125

9. Economy GDP: US$ 382.3 billion, GDP per capita: US$ 5346 GDP (PPP): US$ 842 billion , GDP per capita (PPP): US$ 12,800 GDP average annual growth rate(2004-2008): % 7.5 Trade Balance US$ 45 billion surplus Import (FOB) US$ 55 billion Export US$ 100 billion Export - commodities: petroleum 80%, chemical and petrochemical products, fruits and nuts, carpets Import-Commodities: Industrial raw materials and intermediate goods, capital goods, foodstuffs and other consumer goods, technical services,

10. Export & Import Trends Value: US$ Billion Exports Imports

11. Main Trading Partners (Top 10) Non-Oil Export Partner Import Partners Value: $US Million Source: I.R. Iran Customs

12. Iran’s Main Advantages: • Diversified, Hydrocarbon-rich Economy • 4th largest oil producer in the World • 2nd highest gas reserves in the World • Largest industrial base in the MENA region • 10th Country on Tourism Attractions and 5th on Ecotourism • High GDP growth rate • 4th to 9th rank in production of Zinc, Lead, Cobalt, Aluminum, Manganese and Copper in the world. • 4th rank on diversity of Agriculture products in the world. • 6 Free Trade-Industrial Zones • 19 Special Economic Zones

13. Recent Developments: Comprehensive Tax Reform : • Fixing corporate income tax at a flat rate of 25%, while under the previous law, companies were subjected to both a 10% corporate tax plus their dividends being taxed at ascending levels up to 54%. • Introduction of Many New Tax Holidays and exemptions  Creation of a Central Tax Authority.

14. Floating Single Exchange Rate System : • Unification: from March 2002. • Less than 5% Fluctuations. • Trade System : • Replacement of Non-tariff Barriers by Tariffs. • Rationalization of the Tariffs (35.6% to 16.5%) • Privatization : • More than 20 billion USD Privatized.

15. Fundamental Macroeconomic Reforms (privatization) • Expediency Council Resolutions: Opening up new areas formerly closed to private local/foreign investors. • The general policies of Article 44 of the Constitution of the Islamic Republic of Iran

16. Foreign investment in Iran: policies , laws and regulations and advantages

17. Foreign Investment Policy Contribution to Economic Development Financing Projects, Upgrading Technological & Management Skills, Sharing Benefits and Risks on Equal Term without Discrimination Advantages in Enhancing Products and Output Quality, Increasing Employment & Exports

18. The Body in Charge The Organization for Investment is the sole official authority for the promotion of foreign investments in the country and for the investigation of all issues pertaining to foreign investments. (FIPPA , Article 5)

19. The Legislation: The Foreign Investment Promotion and Protection Act (FIPPA): Substitutes Former LAPFI Ratified in 2002 By Laws: Implementing Regulations of the FIPPA

20. Features of FIPPA: Types of Investments: Direct Investment (Equity Participation) in All Areas Open to Iranian Private Sector Investment through Contractual Arrangements (Non-Equity Forms): -Buy Back Arrangements -Civil Partnership -BOT Schemes

21. Features of FIPPA: Areas of Investment: All Areas in Industry, Mining, Agriculture, and Services: -In Greenfield Projects -In Brownfield projects and existing companies

22. Features of FIPPA: Risks Covered under FIPPA: All non-Commercial Risks, i.e. Currency Transfer, Nationalization, expropriation, Government Intervention and Breach of Contracts by Government

23. Features of FIPPA: Boundaries of Investment: No Limit on Equity Percentage, No Limit on Volume of Investments, No Limit on Profit Transfer, No Limit on Capital Repatriation No Limit on Types of Capital Imported No Import / Export Restriction

24. Features of FIPPA: Settlement of Disputes: Between Investors (Free), Between Investors and Government: Amicable Domestic Courts Ad-hoc Arbitrations ICSID (International Center for Settlement of Investment Disputes): Underway

25. Features of FIPPA: Organization: Organization for Investment, Economic and Technical Assistance of Iran (OIETAI) Foreign Investment Board

26. Procedure For Foreign Investor( Phases 1 to 4 ) • 1. Identification and Selection of Investment Project • 2. Obtaining Preliminary Permit from Relevent Iranian Organization • 3. Issuance of Foreign Investment License • 4. Implementing of Project

27. Features of FIPPA • Investment Licensing Procedure : Submission Of Application  Simplified, Short and Transparent Preparation And Submission Of a Report Draft License Communicated Final License Issued OIETAI Foreign Investment Board Max 15 Days Max 30 Days

28. Why Invest in Iran? (Advantages): 1.Strategic Location 2. Market Potentials & Proximity 3. Labor Privileges 4. Developed Infrastructure

29. Advantages (contd.): 5. Low Utility & Production Cost 6. Abundant Natural Resources 7. Climatic Characteristics 8. Fiscal Incentives

30. Foreign investment Statistices under the Foreign Investment promotion & protection Act (FIPPA)

31. Foreign Investment under theForeign Investment Promotion & Protection Act ( FIPPA) US$ million

32. Sectoral Distribution of Foreign Investment(1993 up to March year 2009) US$ million

33. ْGeographical Distribution of Foreign Investments (1993 to March 2009) US$ million

34. Features of FIPPA: Treaties - Bilateral Investment Treaties (BIT) with 53 Countries, - Regional & Multilateral Treaties with Member States of Organization of Islamic Conference (OIC), Economic Cooperation Organization (ECO). -Double Taxation Treaty(DTT) with 44 Countries

35. Contents of BIT: Promotion of investments: (most-favored –nation treatment) Treatment of investment Expropriation , losses and compensation Repatriations and transfers Subrogation

36. Contents of BIT: Dispute settlement procedure Validity of the agreement: Admission and establishment, Scope and definition of investment ; …

37. International Memberships: Multilateral Investment Guarantee Agency (MIGA) since 2003 World Association of Investment Promotion Agencies (WAIPA) since 1998

38. International Co-operations: World Bank: Project for Enhancing Institutional Capacity of Foreign Investment Promotion in Iran FIAS: Assessment of Investment Environment in Iran UNIDO: Project for Capacity Building in Industrial Investment Promotion UNCTAD: Preparation and Launch of WIRs and certain other survey studies

39. Contact Information Organization for Investment, Economic and Technical Assistance of Iran( OIETAI) Address: Davar Ave. Tehran P.O.Box: 11365/4618 President of OIETAI Tel: +98 21 33967043-33967770 Fax:+98 21 33967759 Foreign Investment Office Tel: +98 21 33967755 – 33967075 Fax: +98 21 33967864 Websites: www.investiniran.ir; www.iio.ir E-mails:fisc@investiniran.ir ; info@investiniran.ir