Investment Protection Deals Signed Between Iran and 6 Countries

EghtesadOnline: In the aftermath of sanctions removal as a result of Iran's nuclear deal with world powers –formally known as the Joint Comprehensive Plan of Action–the administration of President Hassan Rouhani has signed bilateral investment protection agreements with six countries, including Russia and Japan.

News ID: ۷۴۰۸۰۹

08 April 2017

With the goal of attracting more foreign investments, undertaking risk coverage and lowering the risk of investment in the country, the Ministry of Economic Affairs and Finance has signed bilateral agreements "to incentivize and mutually support investment with Japan, Russia, Singapore, Iraq, Slovakia and Luxembourg", reports Shada, the economy ministry's official news service.

According to the report, another investment protection agreement with the Czech Republic has also been finalized. It adds that all these agreements have been signed after September 23, 2015–only months after the landmark accord was signed.

Iran will also hold talks with a number of other countries, namely India, Hong Kong, Mexico, Hungary, Albania and Lithuania, to clinch similar agreements, according to Financial Tribune.

The Organization for Investment, Economic and Technical Assistance of Iran, affiliated with the Economy Ministry, is in charge of negotiating, enacting and legally following up on such agreements, which are the most important legal instruments designed to safeguard foreign investors' assets in the host country.

These agreements protect investors from non-trade risks, including risks related to actions undertaken by governments. They ensure that investors can move their investment returns in cash, are treated equitably as foreign nationals and shielded from any risks emanating from a potential breach of contract by the host country.

Such agreements are also one of the main factors influencing the country risk ratings listed by the Organization for Economic Cooperation and Development.

According to OECD, in recent years, the value of investment guarantees has averaged about 3% of total FDI flows, while some 30% of FDI flows into developing countries.

Thus, investment guarantees and the public and private institutions that provide them influence investment flows into developing countries.

Investment guarantees cover a broad range of products and can be defined as any guarantee and or insurance product that is relevant for international investment. Political risk insurance is one of these guarantees.

Outlook Upgraded

Last June, OECD updated its risk classification and improved Iran’s ranking by one notch, moving it from seven to six. The country is adamantly pursuing a further risk rating decrease, with many officials predicting that its rating will be upgraded by two more points.

Mohammad Khazaei, a deputy economy minister, has been among them, saying that the upgrade in country risk classification will show that excluding a number of political issues, Iran's economic and political risks have decreased while safety rankings in general and those of banks in particular have improved.

In addition to investment risk coverage agreements reached with the six countries, the Economy Ministry has also signed deals "to form joint investment task groups with South Africa, Italy, South Korea, Belarus, Indonesia, Bulgaria, Slovakia and Kyrgyzstan".

The goal is to exchange information on investment opportunities, collaborate for holding events on investment potentials and exchange technical data.