UNCTAD: $5 Billion FDI Inflow to Iran in 2017

EghtesadOnline: The inward flow of foreign direct investment into Iran registered an increase of almost 50% in 2017 compared to the year before and exceeded $5 billion, according to the United Nations Conference on Trade and Development (UNCTAD).

News ID: ۷۸۲۹۲۹

17 June 2018

Based on data published in the World Investment Report 2018, the entity put Iran’s FDI inflow at $5.01 billion in 2017, which was higher by 48.8% compared to $3.37 billion in 2016.

Iran had seen respective FDI inflows of $2.05 billion and $2.10 billion during 2015 and 2014 while the same numbers for 2013 and 2012 were registered at $3.05 billion and $4.66 billion respectively.

A comparison of numbers with Iran’s neighbors indicates stark differences. For instance, at $10.86 billion, Turkey attracted more than double in FDI compared to Iran while the number is indicative of a notable decrease since the country had absorbed $12.94 billion and $17.71 billion in 2016 and 2015 respectively, according to Financial Tribune.

However, Iran was ahead of other neighbors, including archrival Saudi Arabia and Pakistan who respectively registered $1.42 billion and $2.80 billion in FDI in 2017.

UNCTAD, which was established in 1964 as a permanent intergovernmental body and as part of the UN Secretariat dealing with trade, investment and development issues, also records and discloses information on outward FDI flow.

Iran made direct investments in other countries totaling $1.35 billion in 2012, but the number experienced a huge decline to $189 million and subsequently to next to nothing at $3 million in the next two years.

The country’s FDI outflow was registered at $104 million in 2016 and no data concerning this was reported by UNCTAD in 2017.

FDI is an investment made by a firm or individual in one country into business interests located in another country in the form of a controlling ownership.

UNCTAD also put the FDI inward stock of Iran in 2017 at $53.488 billion, and said its FDI outward stock equaled $3.744 billion in the same year. That is while the country’s FDI inward stocks were taken down at $28.953 billion and $2.597 billion in 2010 and 2000 respectively, and the same numbers for FDI outward stock stood at $1.713 billion and $411 million.

FDI stocks measure the total level of direct investment at a given point in time, usually the end of a quarter or of a year. The outward FDI stock is the value of the resident investors’ equity in and net loans to enterprises in foreign economies. The inward FDI stock is the value of foreign investors’ equity in and net loans to enterprises resident in the reporting economy. FDI stocks are measured in USD and as a share of GDP.

In its review of UNCTAD numbers, the Tehran Chamber of Commerce, Industries, Mines and Agriculture (TCCIMA) pointed out that the trajectory of investment in Iran has been falling. The volume of gross fixed capital formation (GFCF) in Iran stood at about $89 billion in 2015 and decreased to 86.5% in the next year. It grew by a miniscule 0.08% in 2017 to remain almost unchanged. All-in-all, after balancing the numbers, the real investment growth rate in Iran has been negative in the past three years.

GFCF is defined as the acquisition (including purchases of new or second-hand assets) and creation of assets by producers for their own use, minus disposals of produced fixed assets.

Iran is not doing very well in case of the ratio of FDI inward stock to gross domestic product (GDP). The ratio stood at 14.5% in Iran in 2017 which is a far cry from the average of 33.6% among developing countries and 40.4% among developed nations. Turkey and Pakistan’s ratios were 22.8% and 14.1% respectively in 2017 while Saudi Arabia’s ratio was reported at 32.8% mostly due to the high volume of FDI inflow in recent years that had reached a high of $12.182 billion in 2012.

As TCCIMA notes, the considerable thing in relation to the increase in Iran’s ratio of FDI inward stock to GDP is that its improvement has not strictly been due to an increase in the volume of FDI. “Iran’s GDP has also decreased from $375.5 billion in 2016 to $368.9 billion in 2017, meaning that the country’s economy has become smaller and its share of the global economy has dwindled”.