Continuing 'Iranophobia' Among Foreign Investors

The latest report from UNCTAD on foreign investments worldwide, published on June 7, indicates that despite the signing of the Joint Comprehensive Plan of Action (JCPOA), foreign investment in Iran remains at a very low level and is astronomically distant from the country's economic goals. UNCTAD, which stands for the United Nations Conference on Trade and Development, publishes a highly regarded annual report in June regarding the latest developments and data related to foreign direct investment globally. According to UNCTAD experts, the volume of foreign direct investment in Iran in 2016 increased to $3.337 billion compared to the previous year, but it still remains significantly lower than the peak during the economic sanctions in 2011 and 2012. For example, in 2012, foreign direct investment in Iran reached $4.662 billion, according to UNCTAD. The volume of foreign investments in Iran, as reported by UNCTAD, appears disappointing compared to the hopes that the signing of the JCPOA had raised in the country. This disappointment is exacerbated by the fact that some Iranian sources published exaggerated statistics (above $11 billion in 2016) regarding foreign investment in Iran. It seems that the statistical agencies of the Islamic Republic continue to confuse pre-agreement foreign investment expectations with actual final investments, creating false hopes. The low level of foreign investment entering Iran indicates that the JCPOA, despite its considerable potential, has not been able to end 'Iranophobia' among foreign investors. In the realm of foreign investments, the risk level of countries is determined by a series of legal, economic, and political factors. In all these areas, Iran has not been able to present a sufficiently new image to foreign investors. If we consider the figures published by UNCTAD, a question arises as to why, despite the signing of the nuclear agreement between Iran and the P5+1 group, the entry of dozens of foreign economic delegations into Iran, and Hassan Rouhani's efforts to improve the level of 'interaction with the outside world', the volume of foreign investment in Iran decreased by more than $1.3 billion from 2012 to 2016. Looking at the latest UNCTAD report, we see that in 2016, Turkey attracted about four times more foreign direct investment than Iran. Additionally, the small country of the United Arab Emirates received about $9 billion in foreign investment during the same year, which is 2.66 times the volume of investment entering Iran. If we extend the comparison beyond Iran's neighbors, we can mention Singapore, a country of six million people, which received more than eighteen times the foreign investment of Iran ($61.597 billion). Iran's weakness in attracting foreign investment and its consequences become clearer when compared to the country's enormous needs for investment. A large segment of the Islamic Republic's expert circles has concluded that Iran needs an annual growth rate of at least 8% sustained over several consecutive years to overcome its current constraints, especially to address labor market challenges. Achieving this growth rate sustainably requires large-scale investments, which, compared to the current capabilities of the country, seems like a dream. For example, the Higher Institute for Management and Planning Research has concluded that Iran needs $150 to $180 billion in annual investment to achieve an 8% growth rate, of which $30 to $50 billion must come from foreign investments. To understand the significance of these figures, it is sufficient to know that, according to UNCTAD statistics, the total volume of investments in Iran over the past years has been $48 billion, while this figure in Saudi Arabia reaches $231 billion and in Turkey $133 billion. How can Iran attract more foreign investment in a single year than the total of previous years? This does not mean that Iran will never be able to achieve $50 billion in foreign investment per year. Achieving this goal, given its potential capabilities, including natural wealth, population, and geographical location, is by no means impossible. However, turning potential capabilities into reality requires significant changes in the country's economic, political, and diplomatic structures. The JCPOA could have created a new atmosphere in Iran's relations with global financial circles, especially international investors, with the message that economic development is at the top of the country's priorities and the goal is to move towards global markets and attract foreign investment and technology. It can be said that the executive apparatus of the Islamic Republic, led by Hassan Rouhani, hoped that by resolving the nuclear issue, it could focus much of its efforts on implementing fundamental economic reforms while simultaneously establishing a new discourse in Iran's international relations. These efforts largely failed during the first four years of Hassan Rouhani's administration. There has been no news of fundamental economic reforms in the country. Even the government's initiatives to improve the legal environment for foreign investment, including preparing new oil contracts to attract major companies, have not yielded the desired results. International financial circles are somewhat aware that Hassan Rouhani, in his second term, still seeks to advance the reform process in Iran's domestic and international policies, but they doubt that the president can cope with the opponents of this process. A very large portion of the levers influencing Iran's economy is not in the hands of the executive apparatus. More importantly, many sensitive areas of the Islamic Republic's foreign policy, which have a decisive impact on the country's international environment (including attracting foreign investments), are not under the control of the president and his government. Under the pressure of these factors, Hassan Rouhani lost very valuable opportunities to reduce tensions in relations with the United States. Today, in a much more hostile environment, the conflict between Tehran and Washington has reached a new peak. It is clearer than the sun that with the continuation of these tensions, Iran cannot become an attractive country for foreign investors. Meanwhile, the unprecedented increase in chaos in Iran's regional environment also fuels the fears of foreign investors. Beyond Iran, the entire Middle East region, sinking deeper into the quagmire of tribal, religious, and nationalist wars, is falling out of favor with investors. Rather than risk investing in a region that increasingly resembles hell, they will turn to countries whose people prioritize development and prosperity.