Investment: Iran's Need, Foreign Influence

One of the hopes that arose after the agreement between Iran and world powers over the nuclear dispute is attracting foreign investments. This hope strengthened when the number of European economic delegations in Tehran increased, and the visits of Europeans and Asians to Iran became the top news in the media, to the extent that Eshaq Jahangiri, the First Vice President of Iran, referred to the frequent and numerous visits of these economic delegations as a 'queue of foreigners.' Although Europeans have outpaced their competitors in the race for presence in the Iranian market and economy, as Hamid Baidi-Nejad, a senior member of Iran's nuclear negotiation team, stated to the weekly 'Tejarat-e-Farda,' foreign branches of U.S. companies are allowed to engage in trade with Iran. This senior nuclear negotiator also emphasized that the Americans have made arrangements for their economic actors and companies to be present in Iran. Baidi-Nejad also reminded that it was the Americans who severed their economic ties with Iran. However, alongside the growing hope of attracting more foreign investments into Iran's economy and the possibility of resolving some of Iran's economic problems following this presence, Ayatollah Khamenei, the Supreme Leader of the Islamic Republic of Iran, has recently used new terms and concepts in his speeches that could raise concerns for foreign investors ready to enter Iran. In recent months, Ayatollah Khamenei has repeatedly referred to the concept of enemy influence, emphasizing the need to close off avenues for this influence. He described one of the current threats against Iran as the influence of enemies. According to the Supreme Leader, influence can occur in various areas, and from his perspective, economic influence, while dangerous, is considered the least significant type of influence. He has also urged government officials to keep their eyes open so that 'enemies' do not gain influence, as the economic foundation can be undermined by enemy economic influence. The Supreme Leader is particularly sensitive to the presence of Americans in Iran's economy, and in one of his recent speeches, he stated that the Americans intended to use negotiations as a means to gain influence in Iran, which, according to Ayatollah Khamenei, has been thwarted. He emphasized that he would not allow Americans to have economic and political influence in Iran. Meanwhile, Hassan Rouhani, the President of Iran, who spent a few days last week in New York, stated during a meeting with American economic actors and merchants that 'one way to reduce the gap between Iran and the U.S. is through economic cooperation.' What does this influence and invitation mean? Where is the line between influence and investment? From the Supreme Leader's further explanations about economic influence, it seems that Ayatollah Khamenei is primarily concerned about the emergence of a situation in Iran similar to the economic conditions of Southeast Asian countries, which experienced a full-blown crisis in their financial markets in the late 1990s. In 1997, Southeast Asian countries and ASEAN members, which had attracted significant foreign investments in the early 1990s, suddenly faced a monetary and financial crisis, leading to a rapid outflow of foreign investments from banks and stock markets, resulting in a full-blown crisis that was later mirrored in Latin America. According to prominent economists like Paul Krugman, a Nobel laureate in economics, the foreign investments attracted in Southeast Asia only led to rapid economic growth and did not result in an increase in economic productivity. Hassan Mansour, an economist and professor in the UK, believes that there is fundamentally no such thing as 'economic influence' in today's world, but he also discusses the considerations of foreign investment and presence in the host country. According to this economics professor, 'the issue of influence is certainly not an economic issue, although it can be interpreted in various ways, but in economics, there are criteria for investment that, if considered, will benefit both parties.' He goes on to mention some of these criteria and considerations, stating that 'a country seeking to attract investment must improve the conditions for attracting it in terms of cumbersome regulations and from the perspective of entry points and authorities. Once the investment enters, the host country must utilize that foreign investment in areas that yield the highest technical and managerial added value and also lead to technology transfer.' Ahmad Midari, an economist and Deputy for Welfare at the Ministry of Cooperatives, Labor, and Social Welfare, has also attempted to provide a different definition of economic influence during a television program. According to Midari, economic influence has a history of over three hundred years, and countries strive to seize the markets of other countries by any means necessary. This institutional economist believes that technological advancements in production have led to domestic markets no longer being able to accommodate the level of production, and thus governments assist their producers in capturing the markets of other countries. Midari identifies the financial system, banks, and stock markets of countries as other suitable areas for economic influence. He also defines economic influence in theoretical and conceptual terms, asserting that 'economic influence is a reality.' However, he emphasizes that more important than the principle of influence is how to adopt methods and programs to prevent influence. According to Ahmad Midari, some economic theories can increase the potential for influence by recommending incorrect policies. Hassan Mansour, the UK-based economist, also acknowledges the harms of the presence of foreign investors and companies in the host country without a strategy. According to this economics professor, 'it is possible to open the doors to foreign investment, and foreign investments can extract the resources of the host country in very easy and simple areas without any commitment to develop technical and managerial human resources and without any commitment to technology transfer.' He refers to these issues and considerations as governance issues and continues: 'Every country must carefully define and determine these considerations, and like all host countries, it must require foreign investors to commit to developing technical and managerial human resources and transferring technology over a specified period.' According to Hassan Mansour, without paying attention to these issues, it is natural that the foreign investor is interested in obtaining the highest profit in the shortest time, and this pursuit of maximum profit may not align with the host country's development strategy. The presence of foreign investors and companies in Iran's economy is not yet confirmed, but despite all the hopes for these investments to settle in the Iranian economy, Saeed Leilaz, an economic expert and analyst, in an interview with the weekly 'Tejarat-e-Farda,' believes that at best, the amount of foreign investment attracted will reach the levels seen during Mohammad Khatami's presidency, which was over 4 billion dollars per year. However, the problem with Iran's economy is not merely the amount of investment attracted; if that were the only issue, Iran's economy would have been engaged in numerous problems despite having generated 1000 billion dollars from oil and gas exports over the past decade. What is important in attracting foreign investment goes beyond the amount of this investment. Achievements such as the entry of up-to-date production technology and the enhancement of productivity are crucial. The struggle between attracting foreign investment and calling foreigners' presence in Iran's economy influence requires a detailed explanation of the term economic influence to avoid misunderstandings in evaluations. Hassan Mansour states: 'Iran is in dire need of foreign investment for many reasons, and in this context, I do not understand the concern about influence. It would be good to have clearer discussions with more details to clarify what is meant. Because following such statements, a kind of policing and security issues arise that effectively destroy the business environment and prevent hesitant foreign investments from entering the Iranian economy.' Ahmad Midari explains that today, among policymakers and decision-makers in Iran, 'active engagement with the global economy' is accepted as a principle. He considers the slogan of 'outward-looking endogenous economy' as a consensus among Iranian economists, which he describes as the 'strategy of resilient economy.' The fear of foreign investment during this period is heightened as, after the tightening of sanctions in recent years, Iran's economy has witnessed the exit of foreign investors one after another from various sectors. Even foreign partners of Iranian automakers, who had deeper roots in Iran's economy, also chose to exit as international and American economic sanctions against Iran intensified. However, by putting together more details from the differing and sometimes contradictory statements of political figures in Iran, one can conclude that, as with many other issues, there is a struggle over attracting foreign investment in Iran between two sides: one group that welcomes foreign investment with open arms and another that, with reluctance and skepticism, sees a hidden conspiracy behind every arrival and departure. It remains to be seen what this struggle signals to foreign investors ready to enter Iran's economy, so they can make their decisions in the not-so-distant future based on these signals regarding whether to engage with or abandon this economy.