‘High-Risk’, 'Propitious' Fields of Investment

EghtesadOnline: In recent years, ample production and services capacities have been built up across the country due to investment attraction policies applied in the different fields of industries, mining and trade, which trend has led to a rising issuance of unplanned permits to establish various businesses.

News ID: ۷۴۹۷۸۸

07 March 2020

This increase has rendered activity in some fields unfruitful such that more investments would lead to a waste of resources and the pile-up of more incomplete projects, the Persian daily Donya-e-Eqtesad reported.

The Ministry of Industries, Mining and Trade has recently released two reports in which it has listed “high-risk” and saturated businesses as well as the ones it calls “propitious” for redirecting future potential investments, i.e. industries promising higher demands, bigger returns and more lucrative markets, according to Financial Tribune.

No ministry, according to the law, is permitted to ban investments in any particular fields since it goes against the principle of free competition and creates monopoly, which precept has created a myriad of problems, including stacked up permits issued for starting businesses, unfinished project and surplus production in some fields.

As more units are working in the same fields, most businesses have to work below their full capacity.

By publishing these two lists, the ministry has announced the fields in which it will, from now on, extend or withdraw support and facilities.

Investments are deemed futile and unpromising in 30 businesses, including packaging of mineral water, tissues, vegetable oil refinement and oil extraction, production of flour, puffed grains, potato chips, processed meat and dairy products, gray cement, bricks, gravel and sand, tiles, fireproof clay and ceramic products used in construction, ready-to-use concrete, construction plaster, steel ingots using induction furnace technology, steel rebars, wires, pipes and profiles, copper wires and cables, faucets and construction fittings, CNG tanks, polyethylene and PVC pipes and connections, dioctyl phthalate, disposable and plastic dishes, tar, ethanol, pesticides and fertilizers, detergents and engine oil.

On the other hand, nine fields have been listed as "propitious", including chemicals and petrochemicals, basic metals, food and beverages, automotive and marine transportation equipment, machinery and equipment, rubber and plastic production, electric machinery, telecommunications devices and medical equipment, textile and apparel, as well as paper and paper products.

In a letter to the Central Bank of Iran’s Vice Governor Akbar Komijani and banking and credit deputy for CBI’s National Development Fund (Iran's sovereign wealth fund), which is the main provider of financial facilities to enterprises, the Industries Ministry has stressed the importance of managing the issuance of permits and allocating loans in a way that prevents resources from going to waste.

Capacities created over the past few years in some areas are more than domestic demand, the letter reads, adding that although one solution to this problem can be expansion of exports, the type of goods produced, their quality and export potential prevent this solution from being practical.

In compiling the two lists, Iran Chamber of Commerce, Industries, Mines and Agriculture, the House of Industry, Mines and Trade, and different specialized departments in the Industries Ministry have collaborated.

The ministry has noted that a great deal of study has gone into identifying the unpromising and propitious industries, but the lists are not final and could be further modified by experts.

The ministry does not aim, according to its officials, to ban investments in what it calls “unpromising” or “saturated” industrial fields, but plans to take measures in the next Iranian year (starting March 20), for investors to tilt toward fields that are of higher priority for the country and more promising.

The ministry has said it will change its criteria for introducing businesses to NDFI for receiving financial facilities based on land-use planning principles as well as the priority and type of activity.

Based on figures released by the Industries Ministry, a total of 5.31 quadrillion rials ($34.7 billion) worth of banking facilities have been granted across the country in different areas since the beginning of the current Iranian year (March 21, 2019), with the industry and mining sectors accounting for 30% of the total sum.

In view of the new decisions and plans, the ministry hopes that industrial permits are issued in a more disciplined manner from next year and resources are directed to fruitful businesses.

Latest on Industrial Permits

The Industries Ministry's latest report on the number of issued permits shows 3.12 quadrillion rials ($20.39 billion) worth of investments are expected to be made in the industrial units for which establishment permits were issued during the first 10 months of the current Iranian year (March 21, 2019-Jan. 20), showing an increase of 21.5% compared with the similar period of last year.

A total of 22.745 establishment permits were issued over the 10 months, registering an 18.7% growth year-on-year.

These projects are expected to create a total of 518,237 jobs, which is 16.7% more compared with last year's corresponding period.

More than 445.43 trillion rials ($2.91 billion) are estimated to have been invested in projects for which operating license were issued during the 10 months under review, indicating a 13.9% decline compared with the corresponding period of last year.

A total of 5,212 operating licenses were issued during the period, which shows a 5.3% growth YOY. These projects are expected to create 81,244 jobs, 4.8% fewer than those generated in last year's corresponding period.