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Desperate for foreign investment, regime to guarantee 10% return.

In Iran's continuing effort to attract much needed foreign investment, the Central Bank has decided to assure all foreign investors a guaranteed return of 10 percent on their investments.

The offer appeared to be an especially desperate attempt to attract foreign capital, which has been slow to come. In fact, statistics from the European Union show that its 27 member states have recorded a net disinvestment from Iran, that is, selling off existing investments and leaving the country in excess of the volume of new investment entering the country.

American residents, citizen and non-citizen alike, have been barred by U.S. law from investing in Iran since 1995. What investment is entering Iran appears to be coming largely from Asia.

The daily Iran, which is state-owned, Saturday quoted Central Bank Governor Mahmud Bahmani as saying, "Iran will pay a guaranteed 10 percent interest on foreign investment.... The Central Bank and Ministry of the Economy will guarantee the return of the principal and a capital profit."

As described by Bahmani, that is an offer no investor could resist. It would be risk-free. If the principal is guaranteed, no investor could lose his capital, although that violates the basic principal of capitalism--that one has the possibility of a great profit, but also the risk of a great loss.

The report on Bahmani's statement did not make clear if the guaranteed return of 10 percent would be calculated on the rial value of the investment or on a foreign currency. If the rial is the basis, a 10 percent guarantee would not assure any real profit since the rate of inflation has only rarely dipped below 10 percent in the last three decades and was briefly as high as 30 percent under President Ahmadi-nejad. It is currently just above 10 percent.

Earlier this month, the Iranian labor News Agency (ILNA) reported that total foreign investment in Iran in 2008 came to only $1,490 million, an inconsequential amount for a country the size of Iran. ILNA did not make clear if that was net investment, that is, after deducting for foreign investors leaving Iran, or was just the gross investment of those entering the country.

The insignificance of that investment figure is clear when put beside the statement a few weeks ago of Oil Minister Masud Mir-Kazemi that Iran's oil and gas industry alone requires $25 billion annually in investment just to keep going.

Meanwhile, the Iranian Chamber of Commerce, Industry and Mines has started a website, www.iran-investment.org, for the purpose of providing information on investment opportunities in Iran. It provides details on Iranian investment laws, taxation and import/export regulations and also lists projects open to foreign investment.

The site operates in 10 languages. As of last Friday, the English language version had only 10 projects listed as investment opportunities, all of them in Qom province.

The website also reported Friday that it had had 845,791 site visitors since January 1 or the astounding average of 5,220 visitors a day. However, a check of the website three days later showed that it still reported 845,791 visitors since January 1.

On Saturday, Deputy Oil Minister Ahmad Ghaleh-Baani told the state news agency that he expected the oil industry to absorb "more than $50 billion" in foreign investment by next Now Ruz. In no year, has Iran ever absorbed that much foreign investment.
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Title Annotation:Economy: Money and its impact
Publication:Iran Times International (Washington, DC)
Date:Jun 18, 2010
Words:564
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