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Iran Economy Update
Issue 78/2017
THURSDAY AUGUST 17TH
Ministry of Foreign Affairs to establish Economic Directorate
As he seeks vote of confidence to retain his post as minister of Foreign Affairs in the next four years, Javad Zarif has promised establishing the „Economic Diplomacy Directorate‟ within this ministry.
In an interview with the economic daily Donyay-e Eghtesad this week, the spokesman of the ministry of Foreign Affairs has cited the necessity and importance of the economy, and benefiting from the JCPOA as the reasons for Zarif‟s decision to create this directorate. Bahram Ghassemi said this directorate will pursue the objective of using political instruments and foreign relations to move economic objectives forward. He said this does not imply establishing a parallel economic apparatus and rather, the ministry of Foreign Affairs will just play the role of a facilitator to lay groundwork to develop economic cooperation.
Iran to increase oil and gas output to 4.6mbpd and 1.2bcm/d in five years In an exclusive interview with Petroleum Minister Bijan Zangeneh, the daily Etemad asked questions about his plans to increase oil, gas and petrochemicals‟ production and exports. A summary of the figure Bijan Zangeneh provided is presented in this table.
Oil output by 2020 4.63 Mbpd from current 3.82 Mbpd
condensate output by 2022
1 Mbpd oil & condensates
exports
3.312 Mbpd from current 2.218 Mbpd
natural gas output by 2022
1.253 billion cubic meters/day
Mbpd: million barrels per day Source: Etemad daily
In this interview, the minister accused some hardline opponents of impeding his ministry‟s efforts to sign deal with foreign countries and said all such oppositions were politically motivated to create the impression in the society that the Rouhani government was incapable of doing things. Zangeneh said the contract with French Total for developing South Pars phase 11 will definitively affect the relationships of foreign major banks with Iran.
Deputy Minister says 36% of industrial units work at below 50% of capacity The deputy minister of Industry, Mine &
Trade announced that 20% of the enterprises at the industrial parks are completely shutdown, which shows an increase compared with the last year‟s figure of 14.5%. Speaking during a TV interview, Ali Yazdani said 64% of the Iranian industrial enterprises are working at above 50-percent of their full installed production capacities, and 29% are working at above 70-percent of the installed capacity. 36% of the enterprises are operating at below 50% of their capacity, he said, according to Mehr news.
Yazdani said that in order to help reviving several enterprises, 1200 units of them have been identified to receive low-interest loans but only 400 units have so far managed to receive such facilities. Yazdani said 20% of industrial enterprises in industrial parks are not active that if being combined with the 36 percent of the ones that are working at below 50% of their capacities, we reach the worrisome figures showing that 40% of the installed production capacities in industrial parks are idle. In regards to the agreements Iran has reached with foreign countries on cooperation for developing industrial park, Yazdani named
2 China as a country in which Iranian private sector will establish sale centers and also South Korea as a country with which Iran will establish technology exchange centers.
MP says no sign of ending recession in housing sector is seen
A member of the Majles‟ Construction Commission said that the recession plaguing the housing sector has reached a critical level, and rejected some assertions that this sector will emerge out of recession this year, Tasnim news agency reported on Sunday. Abdolkarim Hosseinzadeh put the number of empty homes in Tehran at about 500,000, and said the reason for the large number of unoccupied housing units is the unaffordable and “saturated” prices.
On note, o 15 February, the daily Donyay-e Eghtesad published a report on the reasons for the recession in the housing market in Iran in which the author argued that although since 1996, the average income of an urban family has increased by ten percent, the price of residential units and land have grown by 13% and 17%, respectively. Many house owners refuse to sell for less-than-expected prices, and unaffordable prices for many low income families have left half million homes empty.
In March 2017, ISNA published a report showing the total number of unoccupied houses in Iran is 2.5 million, indicating that about $250 billion of wealth is frozen in this sector alone (assuming that on average, each residential unit is priced at $100,000).
According to a report released by the ministry of Road & Urban Development, the number of home transactions dropped by 6% in June/July this year compared with the previous month, and dropped by 2.5%
compared with the similar month last year.
The main point in this report is the increase in home rates despite the 6% decline in transactions, Mehr news wrote on Sunday.
In an article penned in March 2017 by Dr.
Ali Dadpay, the professor of economics at St. Edward‟s University, the author argued
that “the core issue plaguing the Iranian housing market is not decreased demand but reduced supply — especially given the climate in which property owners refuse to sell at a loss. With continuing uncertainty in nonoil sectors, measures to address the housing supply problem — such as further taxes on empty houses and penalizing speculators and investors — have a high chance of backfiring. Therefore, it is prudent to assume that the housing recession will continue through 2017.” This article was published by Al-monitor on May 29.
Meanwhile, on the occasion of the 1st day of the 17th International Exhibition of Building &
Construction Industry (12-15 August) that was held with the participation of 1200 domestic and foreign companies, Tasnim News wrote that according to the estimation of experts, the housing sector has great potentials to generate jobs as every 100- million-toman investment in this sector creates 4 jobs directly and 2 indirectly.
Iran, Russia, Turkey sign energy cooperation deal: Platts
A non-governmental Iranian company has signed an agreement with Russia's Zarubezhneft and the Turkish private sector to jointly invest in oil and gas projects, Platts reported on August 9, referring to a report initially published by IRNA last week.
Ghadir Investment, a public joint stock company, has approval from Iran's oil ministry to carry out oil and gas exploration and production projects, according t o Platts. The company is leading the trilateral agreement but future investment will be based on equal shares among the three.
Ghadir, Zarubezhneft and Unit International, from the from Turkish energy and power sector, signed the rare agreement Tuesday evening in the presence of Russian state officials and directors from the Turkish and Iranian companies. Based on the agreement, the three parties would make joint investment in the development of oil and gas fields both in Iran and overseas according to proposals put forward by any
3 of the parties. The projects' technical and financial works will be carried out jointly under the direction of specialized teams set up for the purpose.
According to Platts, Ghadir is affiliated to the Armed Forces Social Security Organization. It has shown interest in several projects developed by National Iranian Oil Co., carrying out studies on the third phase of the Darkhovein, Sepehr and Jofeir oil fields, as well as the Kish gas field.
Ghadir is the largest Tehran Stock Exchange-listed investment company with seven holdings and 140 subsidiaries operating in various sectors such as oil, gas, petrochemical, power and energy.
Iran says gives priority to develop economic ties with regional nations over admission to WTO
The head of the Trade Promotion Organization (TPO) said that the Islamic Republic‟s priority today is not having been admitted to the WTO but to develop relations with regional nations, IRNA reported on Wednesday. In an exclusive interview with IRNA, Mojtaba Khosrowtaj who is also the vice minister of Industry, Mine & Trade said that the country needs first to develop cooperation with the neighboring and regional countries that have the most [economic] advantages to the country, and explained that “this issue is more important than being admitted to the WTO that the country does not have any especial relations with many of its member states, or economic relations with many of them are not economically viable.”
Khosrowtaj cited the Eurasian Economic Union (EAEU) as one of the regional economic entities with which the Islamic Republic seeks developing engagement, and confirmed that the negotiations with the member states are at the final stage. “This means agreement with five countries with a total population of 180 million, which result in developing Iran’s regional cooperation and our country will be recognized as one of
the trade partners of the EAEU members1,”
he said. “Our major mission today is developing regional ties in accordance with logistic and price advantages and our export capacities and also developing mutual and multi-directional cooperation with our export target countries,” said Khosrowtaj.
Of note, in a joint session with his Russian counterpart during his visit to Moscow in late March, President Hassan Rouhani had said, among other things, that “Establishing a free zone between Iran and the Eurasian member states was another issue we discussed today that can facilitate trade between Iran and the 5 Eurasian Union countries.”
A Russian news agency reported on Monday that a temporary agreement on establishing a free trade zone between the EAEU and Iran may be signed in 2017.
According to Sputnik, Chairman of the Eurasian Economic Commission (EEC) Board Tigran Sargsyan said that the negotiations are expected to be finished by the next EAEU summit, scheduled to be held for October 11. According to Sputnik, in June, the EEC said that the EAEU and Iran had finished working on the text of the temporary free trade zone agreement and that the sides will continue talks on liberalizing mutual market access and coordinating tariff obligations in the near future.
Minister of Foreign Affairs Javad Zarif has already confirmed Iran‟s priority in developing economic ties with the neighbors as in a session held on Wednesday morning to discuss his nomination for the next four years he said “neighbors are the best and most important economic partners for us, and the presence of the private sector in the neighboring countries is an effective instrument for bolstering mutual trust and creating jobs inside the country.”
1 Comprising Tajikistan, Kazakhstan, Russia, Armenia and Belarus
4 Car importers threatened Industry Ministry to file complaint if suspension of order registration continues
While the lawmakers are busy these days with discussing votes of confidence to the Rouhani‟s nominees for the next four years, ISNA published a report on the status of car imports and the problems plaguing car importers these days. According to the news agency, the ministry of Industry, Mine
& Trade has halted registering orders for car imports until import regulations in this sector are amended, but the country‟s car importers have claimed compensation for damages they‟ve incurred by this decision.
According to ISNA, Farhad Ehtesham- Zadeh, the president of Iranian Automobile Importers Association has said the body will file complaint against the suspension of registering car import orders, and argued that the closure of the webpage for registering car import orders is “illegal.”
According to ISNA, car imports into the country edged up by 130 percent during the first three months of the current Iranian year and this intense increase caused the ministry of Industry, Mine & Trade to suspend registering import orders to a later time, when the cabinet approves a plan to regulate car imports in a more restrictive manner. ISNA wrote that Vice Industry Minister Mojtaba Khosrowtaj has so far resisted the pressures exerted by car importers and asked them to wait until a plan already submitted to the government be approved.
In mid July, local media reported that a plan prepared by the ministry of Industry, Mine &
Trade to regulate imports of car and auto parts has stirred oppositions from a number of local importers who believe the it serves the interest of semi-state car manufacturers while drives local importers out of the market. (For more, you can see the July 11 issue of the Iran Economy Update newsletter).
Iran-UK
The twitter account of the British Department for International Trade (DIT) wrote on Wednesday morning that Ali Araghchi, the international affairs manager of Iranian IDRO (Industrial Development &
Renovation Organization) met Keith Wellings, the deputy director of the DIT) to discuss infrastructure opportunities for UK firms in Iran.
Iran-Japan
Japan to aid Iran in river water management: Tasnim
Tasnim news agency - Japan signed a contract with Iran to provide water management strategies at southwestern Karun River. The Japan International Cooperation Agency (JICA) and the Forests, Range and Watershed Management Organization of Iran signed the agreement in Tehran on Tuesday under which the Japanese government will help Iran carry out land use plans and water management practices to protect and improve the quality of water in Karun and increase the flow rate of the river. Based on the agreement, a team of Japanese experts will be stationed in Iran to train forest, range and watershed management programs, while an Iranian delegation will also receive training in annual courses in Japan.
5 IDRO
CEOs of IDRO, IMIDRO and other economic/industry organizations to attend 4th Europe-Iran Forum
Deputy Minister for Industry, Mine and Trade Mansour Moazzami who is also chairman of IDRO (Industrial Development
& Renovation Organization of Iran) will outline how this organization is positioning itself as the enabler of new investment in Iran‟s key industries, partnering with foreign multinationals to find investment models that worked for Iran‟s industries, Iran‟s economy, and Iran‟s people. Having recently concluded a historic $770m JV agreement with French automaker Renault, Mansour Moazzami will explore what has made it possible for IDRO and its foreign partners to find mutual agreeable terms for these groundbreaking investments.
TCCIMA President Massoud Khansari, CEO of Iran Air Ms. Farzaneh Sharafbani, President of OIETAI Mohammad Khazaie, IMIDRO President Mehdi Karbasian, and CEO of Middle East Bank Parviz Aghili are some other Iranian keynote speakers at the 4th Europe-Iran Forum scheduled to be held on 3-4 October, 2017 – Zurich, Switzerland. Among the foreign keynote speakers at the forum are Ambassadors of Denmark, Belgium, UK, and the Netherlands to Iran as well as the UN Iran resident coordinator, Shell‟s vice president to Iran, and Alstom‟s senior vice president public affairs.
CBI report
CBI released report on urban family income/expenditure status
The Central Bank of Iran has published a report on the household budget statistics in urban areas in the Persian year of 1395 (ended 20 March). For the urban families, the CBI put the average family member number at 3.33, which shows a reduction compare with the previous year. The following tables show that income and expenditures of average urban families in
Iran last year increased by 11.3% abd 11.4%, respectively.
Iranian families’ monthly expenditures and revenues in 1395 (in toman)
1395 y-o-y change%
Expenditures (toman/month)
3,275,000 11.4% ↑ Revenues
(toman/month)
3,269,800 11.3% ↑
Also, the table below shows the average Iranian urban families‟ expenditures‟
breakdown, and the share of different sector expenses to the total expenditures. As the table shows, housing sector (35.5%) has a key contribution in total expenditures.
Expense share of
total expenses
year on year change housing, water,
electricity, gas ...
35.5% 12.9% ↑ food and beverages 22.9% 8.0%↑
transportation 10.6% 16.1% ↑
miscellaneous goods/
services
8.4% 11.9% ↑
health & medical treatment
5.9% 12.7% ↑
clothing and footwear 4.3% 6.4 ↑
housing furniture 4% 8.5 ↑
telecommunication 2.1% 11.1% ↑ restaurant and hotel 2.1% 13% ↑
education 1.9% 12.6% ↑
cultural/recreational affairs
1.9% 10.2% ↑
tobacco 0.3% 19.3% ↑
Total 100 11.4 ↑
Source: CBI report
