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Rediff.com  » Business » Why Indian companies must do business in Iran

Why Indian companies must do business in Iran

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January 18, 2008 14:12 IST

"We also import and export to America."

These words from Iran's Finance Minister Danesh Jafri stunned the gathering into silence at a seminar arranged by the Federation of Indian Chambers of Commerce and Industry (FICCI).

After letting the significance of his statement sink in for just a second, a smiling Jafri clarified that while Iran does engage into business with the United States, it is not done directly but through a third country.

The Iranian finance minister, who is in India to attract investment, was trying to allay fears among Indian businessmen that American resistance to Iran is creating insecurity among the companies and making them think twice about doing business with Iran.

Integration with world economy has now become a well-established policy of the Iranian government and if the Jafri's presentation was any indication, it sounded better than those of so-called liberal South Asian countries. At the venue, the Iranian Embassy was distributing CDs containing forms and full details of the country's industrial policy, even as Jafri insisted that licenses for the industry and new investments will be given within 30 days.

India's Ambassador to Iran Manbir Singh and Indian Oil chairman Sarthak Behuria were also present at the meeting, where Jafri presented a confident picture of Iran. He refused to underscore the pressure from the United States on Tehran or the countries desirous of doing business with it. He reminded the gathering that even the US intelligence agencies had accepted that their information about Iran's nuclear weapons programme was incorrect.

During his presentation, he emphasised that Iran's geographical location is well suited to companies interested in oil and gas, power, petrochemicals, mining, and the services sector.

Iran, the fourth largest oil producing country and the second largest gas producer, has a big opportunity to enter the hydrocarbon projects, he said.

When rediff.com asked him about the possible problems in acquiring international finance for the proposed Iran-Pakistan-India pipeline, Jafri said: "Iran and India can finance the project easily." When further questioned about its progress, he passed the buck by saying, "It is not a bilateral project. It involves three countries. If India and Pakistan can conclude the talks then we can start the project."

On the American opposition to Iran he said, "We can live with opposition from Russia or the US. We would continue doing what is good for us."

He said that Iran is has not only oil and gas but also surplus electricity to export. He affirmed that Iran will soon produce 20,000 megawatt of nuclear energy.

When asked about the long-pending LNG gas deal that has yet to be finalised because of the high price demanded by Iran, he said: "I can say that we are not raising the price. International price has risen after we signed the memorandum of understanding." (An MoU is just an agreement to enter business)

"The price of oil and gas is not a bilateral issue. The increase in oil price has been very high recently. (Even) we are not happy about it," he said.

Currently, annual bilateral trade between Iran and India stands at around $2 billion, which is less than one per cent of India's global trade.

The Iranian minister, while highlighting the advantages of doing business in Iran, said that Tehran is uniquely located sharing borders with important regions. It is in proximity with China, Central Asian countries, Africa, West Asia, Europe and South East Asia. Jafri also emphasised that a legal framework has been put in place and the security of foreign investments is ensured through new changes in the law and the Constitution.

Iran, the minister said, had reduced tax rates from 65 per cent to a flat 25 per cent. It has given tax holidays to agriculture, industry, mining, tourism, and exporters.

The enactment of a new Foreign Investment Promotion and Protection Act to replace the earlier Law Concerning Attraction and Protection of Foreign Investments in Iran will provide full security and legal protection to foreign investments based on transparency and international standards, Jafri pointed out.

The minister emphasised that steps have been taken to settle industrial disputes. Iran has signed a double taxation treaty with 44 countries while talks are on with India too for this.

He said Iran is now opening up like never before. Few years ago, foreigners could only own 49 per cent of any company but now there is no restrictions and foreigners can own 100 per cent share in companies operating in Iran.

He also said there will be no limit to repatriation of income and there is a buy-back policy in place where if you invest in, say, an oil field, you will get your investment back and also be paid according to the prevalent market price of gas or oil.

Jafri said Iran is also open to non-equity forms like civil partnership and built-operate-transfer kind of projects. Indians can invest in new projects or even buy existing companies. But according to Iranian laws, private parties cannot own the land that has gas and oil deposits, he added.

He said he is offering investors Iran's vast domestic market, which has a population of 65 million, and, also quick access to neighboring markets with approximately 300 million people.

Ambassador Manbir Singh said, "Iran holds out major opportunities for us."

Asked about the minister's promises, Behuria, who is also the chairman of the India-Iran Joint Business Council, gave the other side of doing business in Iran.

"The issue of banking and reimbursement of the Iranian Letter of Credit and their confirmation by Indian banks has remained one of the most demotivating factors for the Indian and Iranian businessmen to build upon the existing trade relations."

He also demanded that there should be a conflict arbitration council between affiliate chambers of the two countries to assist member companies in contractual issues and in recovery of payments.

Another area for worry is the issue of visa. Behuria said he has been asking for a multiple business visa facility for three years. Air connectivity between Iran and India is yet another problem. Behuria said that the Iranian government should open its skies for Indian carriers for passenger as well as cargo services.

Sheela Bhatt in New Delhi
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