This is a moment of important transition for our country as well as our financial markets. As the regulatory and supervisory body of the Iranian capital market, the SEO keenly feels the impact and possibilities of this transition.
We have witnessed a triumph of diplomacy and good sense recently, as the long and complex negotiations between the P5+1 and Iran have culminated in a win-win accord grounded in mutual respect and a desire for peace. This accord has opened the way to Iran broadly engaging and connecting with the world again and we anticipate its full implementation in the near future.
This new engagement is well under way at the governmental level. Over the course of the last few months, our country has hosted many ministerial and presidential delegations from across the globe.
This new engagement is also under way at the private commercial level. We have some very good evidence for this: it’s difficult to get a hotel room in Tehran these days! But if you are coming to visit on capital markets business, please call on the SEO, as other visitors do almost daily, and we will help with your reservations!
Iran’s commercial engagement with the world is nothing new. Many of you will know that we have a history as a center of commercial interaction and engagement. Two thousand years ago a network of transportation infrastructure that was quite advanced for its time allowed traders coming from China to follow the Silk Road across hundreds of kilometers of empty desert in central Iran to get to Europe. And surely there were times in ancient history when it was difficult to secure a room in one of our Silk Road caravanserai!
But let me return from the interesting past to the exciting present.
Certain factors are most often mentioned when analysts explain the drivers of opportunity in Iran. Iran’s demographic situation is very attractive. Our population is large with 80 million people. It is young, with two-thirds below age 30. It is educated, with 25% having university degrees. Our GDP is among the top twenty worldwide by PPP, even after decades of economic sanctions.
Under the sanctions, Iran managed to follow the guidelines of “economy of resistance”, proposed by the Supreme Leader of the Islamic Republic of Iran, establishing a knowledge-based economy relying on domestic capacities and cutting dependence on oil revenues.
We are a very stable country in a chaotic region. We have a very strong diaspora. We have abundant natural resources well beyond oil and gas. And we have diverse manufacturing and exporting industries. All this led Goldman Sachs a few years ago to include Iran among the “Next 11” fastest-growing economies after BRICS.
Our Stock Exchange is the oldest in the Middle East, founded about 50 years ago. It is also one of the largest in the region, with a market capitalization of around $104 billion. In addition to the TSE, we have three other exchanges: Iran Fara Bourse for sukuk, derivatives, ETFs; Iran Energy Exchange for oil, gas, electricity and other energy carriers; and Iran Mercantile Exchange for agricultural and industrial commodities. Our capital market financial institutions will be familiar ones. We have 8 domestic investment banks, 107 brokerages, over 130 registered mutual funds, ETFs, portfolio managers, and investment advisory firms.
Throughout Iran there is a wide range of investment opportunities across many industries. Some of these will be through government privatization plans. In addition to capital investment needs and opportunities in our industries, we have needs and opportunities for investment of management expertise. This should be of interest to our foreign partners who are able to create value and drive growth by bringing in their operational and managerial skills.
Our Foreign Investment Promotion and Protection Act (FIPPA) was introduced in 2002 to enhance the legal framework and operational environment for foreign investors. A license under this law protects imported capital from political risk. In addition, foreign investors may readily hold securities on the Tehran Stock Exchange or Iran Fara Bourse. Furthermore, there are no restrictions on foreign nationals forming and owning companies in Iran up to 100%.
Let me address some of the major priorities and projects as our market opens up to greater international participation.
Our local market is currently grappling with a domestic shortage of credit and high funding costs of up to 30%. In order to help address these, we wish to develop the sukuk market, introduce new instruments such as new types of sukuk funds and derivatives, and broaden and sharpen the range of investment options available to our investors. Because we expect our market players and issuers to now deepen their foreign interactions, the SEO will also take steps to internationalize and enhance the capabilities of our local players.
Of course, we want our initiatives and enhancements to be sustainable, so they must be well-considered and obviously change will be gradual. Thus, Iran will be in a period of developing its soft infrastructure as it assumes a higher international profile. During this period there will be emphasis on improving policies and regulations, building relationships, and strengthening local players. Therefore, short-term expectations should take account of this soft infrastructure development.
In this initial period, there are important roles for our foreign friends to play. Let me mention some of them.
We wish to improve policy and soft infrastructures with consultation, and we welcome the views, opinions and ideas of international experts on improving our economic climate. In particular, we welcome studying and learning from the experience of other countries. We will of course have challenges ahead but those who are willing to engage and work with us through the challenges will do best.
My last message to you is a message of welcome. We welcome you as partners in our capital market, as advisors to our institutions, and as intermediaries for connecting Iran further to global markets. We particularly welcome institutions that have a long-term horizon, are open to sharing their knowledge, see the value of a local presence, and want to add something to our local market. We welcome your visit to learn the opportunities and meet the players for yourself.
On a personal note, I’d like to ask you to do leave some time to enjoy the ancient Iranian culture when you visit. I’m confident that if you travel in Iran, you will find that the message of welcome is extended to you by everyone you meet.
As Iran demonstrates its long tradition of commercial openness, engagement and cooperation with its neighbors and friends, may I have the opportunity to welcome you to Tehran an soon?