Iran: Investing
In this page: FDI in Figures | What to consider if you invest in Iran | Procedures Relative to Foreign Investment | Investment Opportunities
According to UNCTAD's World Investment Report 2023, FDI inflows to Iran amounted to USD 1.5 billion in 2022, up by 5.3% year-on-year. At the end of the same period, the total stock of FDI was estimated at USD 61.6 billion, around 17.5% of the country’s GDP. Iran's Foreign Investment Organization reports that since President Ebrahim Raisi took office in August 2021, the country has secured USD 10.6 billion in foreign investment. Russia, China, the UAE, and Turkey emerge as the leading investors, with nearly half of this sum allocated to the oil and gas sector. However, it's important to note that these figures do not represent cash funds directly entering the country; instead, they refer to the value of approved investment projects and contracts undertaken by foreign entities.
The flows of foreign investment in Iran have remained very weak in recent years, compared to the enormous potential that the country can offer. This is due to several factors: omnipresence of the state in the economy, external political risks (the American embargo, economic sanctions, tensions in the region), as well as internal issues (the impoverishment of the population, social risks, inflation, crisis of the political regime), and heavy bureaucracy in all sectors. State interference erodes economic freedom across all fronts, while corruption and institutional weaknesses in the legal framework weaken the rule of law. With the government dictating production and deriving the majority of its revenue from the oil sector, the private sector faces constraints imposed by a burdensome regulatory environment. Additionally, employment regulations are restrictive, leading to a stagnant labor market, and monetary stability suffers from government controls that distort price levels. On the other hand, the country offers a poorly penetrated, large consumer market; moreover, the country benefits from its strategic location, providing access to both regional markets in the Middle East and Central Asia, while also serving as a crucial waypoint for trade between Europe and China, and is rich in natural resources. Iran ranks 62nd among the 132 economies on the Global Innovation Index 2023, 149th out of 180 in the 2023 Corruption Perception Index, and 169th out of 184 countries on the latest Index of Economic Freedom.
| Foreign Direct Investment | 2020 | 2021 | 2022 |
|---|---|---|---|
| FDI Inward Flow (million USD) | 1,342 | 1,425 | 1,500 |
| FDI Stock (million USD) | 58,711 | 60,136 | 61,636 |
| Number of Greenfield Investments* | 0 | 0 | 0 |
| Value of Greenfield Investments (million USD) | 0 | 0 | 0 |
Source: UNCTAD - Latest available data.
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Iran represents an important market (70 million inhabitants) with a young population eager to consume foreign products. It is a solvent market with an enormous need for consumer goods, equipment and large infrastructure projects (electricity, water, accommodations, transport, etc). Production costs (labour, energy, etc) are low.
Iran is the world’s second largest known natural gas reserves and fourth largest oil reserves, which will last over 100 years at current rates of extraction (according to the government).
The influence of the State on the economy is very important, with numerous organisations linked to the state and disposing of funds and important budgets without coherent management. Corruption is wide-spread in the country.
Geopolitical tensions, particularly with Israel and domestic instability are also major risk elements.
In order to attract foreign investment and promote knowledge transfer, buy-back systems have been established in which the revenues of a foreign investor partner can be repatriated in the means of goods and services produced by the project. In terms of investment, the Iranians offer privileges to investors who can provide long term strategies and transfer of technologies.
After Iran agreed to limit its reserach on the nuclear, the 5 permanent members of the UN, together with Germany and the EU reached an agreement called the Joint Comprehensive plan of action in 2015, as a result of which most of the economic sanctions on Iran were raised. Nevertheless, President Trump stongly criticized the agreement from which the US withdrew in May 2018. Trump also threatened the companies pursuing business with Iran, saying that they will have to make a choice between the US and Iran. The EU announced on September 2018 that its members would set up a payment system to allow oil companies and businesses to continue trading with Iran in a bid to evade sanctions after the US withdrawal. The oppportunities for investment remain very uncertain and major companies already annouced they would leave Iran (Total, Siemens, Daimler ... ).
Useful information may also be found in the World Bank 2018 Report on Doing Business in Iran. It is advised to inquire about the position of one's country towards investment in Iran and to learn more about specific risks from the national Ministries of Foreigns Affairs.
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Latest Update: April 2024
