A major Two-day International Conference organized by:

THE BRITISH-IRANIAN CHAMBER OF COMMERCE

And

THE ROYAL INSTITUTE OF INTERNATIONAL AFFAIRS

A two-day conference entitled 'Iran's Financial Future in connection with Europe' was held commencing on Monday and Tuesday the 30th of June and 1st of July 2003 at Chatham House, London. This conference was made possible through the considerable efforts of the British-Iranian Chamber of Commerce in cooperation with the Royal Institute of International Affairs in London.

More than one hundred and eighty participants from Iran, Britain, and other European countries along with correspondents of various domestic and foreign media organizations took part in this productive conference, which was markedly different from any other such gatherings by the two countries in London over the past 25 years.

In coordination with The British-Iranian Chamber of Commerce and The Royal Institute of International Affairs, the conference was auspiciously held under the Presidency of Lord Temple Morris, President of British-Iranian Chamber of Commerce and the Vice Presidency of Professor Victor Blumer-Thomas, Manager of the Royal Institute of International Affairs. The conference was inaugurated by a lecture presented by the Right Honourable Ms. Patricia Hewitt, the British secretary of state for trade and industry.

After first welcoming H.E. Mr. Tahmasb Mazaheri, the Iranian Minister for Economic and Finance Affairs, other Iranian officials, and the other participants present, Ms. Hewitt, delivered her wellcoming speech. It is to be noted that prior to the start of this conference the British and Iranian Ministers had already met and held discussions with one another.

The next presentation was that of H.E. Mr. Tahmasb Mazaheri the Iranian Minister, who was in London at the invitation of his British counterpart. He focused his lecture on the Iranian economy and the opportunities inherent therein, as well as foreign investment in Iran. Following his lecture, questions were raised by the conferees to which the Minister replied in some detail.

HE Tahmoures Mazaheri
Minister of Economic Affairs and Finance, Iran
Opening Keynote Addresses

Ladies and Gentlemen,
Diplomacy, in the realm of politics, is considered to be the art of the possible. Yet others go beyond
this expression and define it as the art of the impossible. Diplomacy and politics are rightly perceived to make possible what appears to be impossible. In our region, however, precisely the reverse seems to apply. Politics and diplomacy, as laid out and played by foreign powers, aim and attempt stubbornly to turn the possible into impossible.
I claim no authority in political domains. But, viewing the perspective in our region from a purely economic stance, it is only too evident that the assertion is true. The region that extends from the south of the Persian Gulf to the north of the Caspian Sea embodies a large portion of the world's riches and the potential to serve as a model of prosperity and a growth engine for the rest of the globe. But this vast potential is constantly restrained and inhibited by undue outside intervention.
The link between the energy resources in the north and the south is simply too obvious to defy or deny.
It will be established and enlarged regardless of political intentions and ambitions. It is just the natural course to follow. But the hampering and interference serves only to retard progress; a consequence which brings more harm to the countries in Central Asia and the Caucuses than it does to others as it allows down decelerates growth and impairs regional prosperity.
For us, however, the window to the global economy opens wide and broad to the region. Our geographic location, material and human resources, industrial background, expansive infrastructure and transit capabilities are all consorted to turn Iran into the center of economic activity and the principle provider of goods and services in the region. We view this not just as an option, but also an obligation that we should shoulder towards Iran and the region.
To achieve this, of course, requires continuous coordination of policies and harmonization of procedures within and among the regional countries; a feat we try to accomplish through regional institutions such as ECO as well as other bilateral and multilateral arrangements. And there is no exaggeration in claiming that the process follows a successful trend. The level of extent of economic collaboration and activity with the regional countries continues to grow in all directions.
Liberation of Afghanistan, in this midst, unblocked another fertile ground. We continue to offer grants and credits particularly to the private sector to stimulate development and encourage projects of sustainable impact and duration. Long term stability of Afghanistan, after and above all, relies mainly on the success of its restructuring and reconstruction process.
The same is true for our other neighbour Iraq, whose people have suffered long years of war, repression and economic deprivation. We look forward to a prosperous economic relationship with the Iraqi people and participation in its reconstruction effort. Social, cultural and economic synergies between the two nations are too overwhelming to imply otherwise.
We remain, at the same time, fully aware of the need for adjustment of policies and procedures, which enable enhancement of regional role and participation in the world economy in an increasingly uniformed global environment. Reform and restructuring has no choice but to start at home where we have to put our domestic economy in order as we expand our links to the outside world.
Globalisation is the most heatedly debated economic issue of our time. Its devoted advocates and zealot opponents line up against each other, often in confrontational violence, at every meeting and forum where world economic players come together. The way we see it, the issue has its vices and virtues like any other issue of international significance.
If it entails a Darwinian economic environment, as it is occasionally proclaimed, where the weaker and smaller has to be absorbed by the bigger and the more superior. Survival of the, it certainly portrays a dim fittest is not the key to an equitable world economy. Instead there should be a constant attention to empowerment for the most vulnerable. It is bound to fail, as did its Orwellian rival scare world of unequal equality. Globalisation, as it prescribes removal of artificial and superficial barriers to stimulate and enhance economic exchange and relationship, is a welcome phenomenon, which can contribute to an elevated universal prosperity.
In drawing our reform strategy, therefore we have looked deeply into our domestic needs and requirements with a simultaneous view on the exigencies of global economy. Our reform is aimed at opening the market to domestic and international investors while preserving a decent level of social justice and promoting an approach based on equal opportunity of prosperity for all individuals and groups. To untangle the complex web of legal and procedural regulations, reverse long process of centralized economy and promote private role against a deeply entrenched public sector and undue trade and investment barriers has proved, as expected, to be an ominous task. It demanded before all, a genuine and profound debate among various groups and institutions representing an array of political views and aspirations to arrive as a consensus approach. That, ladies and gentlemen, has to a great extent been achieved now and there exists an ever-increasing display of concord among all players on the fundamental requirements of our economic development.
The basic elements are quite simple and highly salient. We have a large population that is young, bright, educated and energetic. More than 36% of the population is currently under 15 years of age. It constitutes our worthiest asset as it represents a tremendous force for productivity and growth. It is, at the same time, our greatest challenge, as we have to foresee, prepare and plan for hundreds of thousands of jobs every year during the next decade.
We have succeeded largely, thus far, to tame inflation, sustain reasonable growth, reduce and simplify taxes, unify the exchange rate, remove non-tariff barriers and regulate tariffs and customs procedures to allow better flow of goods and services. These have been done in a manner that ensures stability and irreversibility of the process. But we still need to do a lot more to deal effectively with the rigorous challenge of unemployment. A challenge that can eventually be met through sustained liberalization accelerated privatisation and enhanced domestic and foreign investment.
In the oil, gas and petrochemical sector, huge projects have been under way attracting tens of billions of dollars in foreign and domestic investments. Local private and public companies continue to flourish and improve rapidly their capabilities to the level of highest international standards in this sector as the result.
The trend continues as still more investment is envisaged in these vital areas. During the course of this year alone, contracts worth over 8 billion USD are expected to be concluded for the South Pars alone.
This is aside an in addition to investment opportunities for transportation and marketing of products
including the LNG Other offshore development projects aimed at increased oil and gas production will also continue unabated.
The same is true for onshore development projects including major operations foreseen in Azadegan and Babgestan fields as well as other areas in South and Central Iran. Development of Caspian fields is also under implementation promising new opportunities for investment in related activities. To this, we should add a large number of onshore and offshore exploration projects, which have now received parliamentary approval for their implementation.
In the petrochemical sector, the pace and quality of progress are both rapid and significant. This is quickly turning into a multi-billion dollar business with tremendous potential international participation in all its aspects. Since Mr. Nematzadeh is making a full presentation on the subject, I will not delve any further into it.
I can only stress the point that nearly all major European companies, including the British, are already aware of and involved in these projects as financiers, operators, and/or partners. They have the advantage here, as they do not have to compete with American companies who are forbidden to enter into these projects, but would still have to compete with persistently aggressive Koreans, Japanese, Malaysians and more recently the Chinese, Russians, South Africans, and Indians.
A large number of projects and activities are also in the horizon in the mining and industry sector.
Here the pace of privatization has been slow but is bound to accelerate as there is a strong determination to reduce Governmental role in owning and running manufacturing plants and production facilities. The automotive industry is particularly passing through a critical phase as production has increased many-fold in recent years paving the way for partnership with major international players to produce quality cars for Iranian and regional markets. The same is true for other industries from household appliances to heavy machinery.
The transportation sector still needs extensive investment to expand the infrastructure. Schemes have been developed to facilitate private domestic and foreign investment to build major or roads and highways and broaden and major modernize the rail road system. Civil aviation and airliners also need to improve and increase their facilities and fleet with the support of Government but also utilizing local and foreign investment and participation.
The agricultural sector too enjoys support from the government for to stimulate growing Iranian and
international participation in crop production and the related food industry. Medical, health and drug industries are also given a chance to enter the market through improvement of already large and vast local capability.
A major privatisation effort is taking shape, in the mean time in the utilities and services. Power generation is being transferred to the private sector through award of contracts for new plants and paralleled with a gradual move to hand over operation of the existing plants to private companies. New power generation plants are offered under BOT and Boo schemes. The contract for the first BOO plant is already awarded and several other plants are under tender or negotiation at this time. Our Ministry is discussing with our counterparts in the Ministry of Power to ensure success of these projects through provision of appropriate guaranties.
A similar effort is pursued in the telecommunication industry. Several private companies have already been awarded contracts for expansion of fixed line networks. Private companies are also increasingly involved in networking and production of fibber optics, switches and other instruments. In the mobile sector, private sector will soon be involved in providing prepaid services.
But the big event is just a few months away when the first license for an independent operator is under preparation for auction. This will offer a candid opportunity for major international operators in Europe and the UK to enter into a very promising market. We also welcome and encourage partnerships and investments in the highly important information technology and the advents of new economy in all its forms and aspects.
Liberalization and privatisation has further made inroads in banking and insurance industry. The first private banks have now started operation inducing a fresh breath of competition and service quality to the customers. Insurance and re-insurance follows a similar course. Both seek international cooperation to extend their reach and increase their capacity to provide a wider range of services.
The capital and stock markets are also revived and reformed providing attractive investment opportunities for Iranians and foreign investors. There has, at the same time, been a successful entry into the international capital market through, as you should already be aware, issuing of binds by the Central Bank. This is the first initiative for a process, which is bound to provide capital resources for other public and private institutions in Iran.
Through all this, we are devoting focused attention to look after the purchasing power of people, especially low income ones and be conscious about the drawbacks of each reform task and manage
subsidy reductions in a manner that will not overburden the hardship on the people. Simultaneously,
we proceed with improving the health and social security service to ensure that all individuals will have access to basic heath requirements and minimum and decent livelihood.
In short, we have pressed for a steady and sustainable course of reform to consolidate what has been done before and remove the remaining loopholes and bottlenecks that impede or inhibit development in order to create a level playing field allowing progress through competition wile minimizing adverse short-term impacts on the individuals. Our efforts are as broad and as comprehensive as they could be perceived, and we are leaving no screws unturned.
The results in 2002 indicated another year with positive growth at about, increase in private sector investment of 16%, rise in consumer confidence of around 4.5%, and further diversification of production base with services now taking up over 44%. Budgetary and monitory policy also yielded another year of positive current account and solvency and liquidity remained at sound levels. With consistency and prudence, we hope and pray for a successful outcome.
I refrained, in this brief sum up, from going into specific details, which will be presented by Mr. Khazai and other colleagues during the seminar. The provisions of the new law on foreign investment and level and content of new foreign investments will also be addressed in the discussions.
I think I have already over-burdened your indulgence, so I will now step back and open the floor for a few questions.
Thank you.
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There followed a speech by Mr. Hashem Pesaran, Professor of Economic and Political Sciences Faculty of Cambridge University, which concentrating on the important role that international banks will have on financing Iran's future.

The Law on Attraction and Protection of Foreign Investment in Iran and the ways and means thereto, was the main topic of the address presented by Dr. Khazaee the Iranian Deputy Minister for Economic and Finance Affairs and President of Organization for Investment, Economic and Technical Assistance of Iran (OIETAI). He in turn took questions from the participants.

Foreign Investment in Iran:
Advantages and Opportunities
Speech by H.E. Dr. Mohammad Khazaee

Dear Lord
Distinguished audience,
Ladies and Gentlemen,
At the outset, I would like to express my pleasure for this opportunity given to me to address statesmen and representatives of the business community of Britain. Also I would like to state my gratitude to Chatham House and the Royal Institute of International Affairs, who lay the ground for holding this seminar and provide both countries with an opportunity to explore new frontiers of economic and political relations. I hope that by full utilization of this opportunity, we can open new prospects for joint cooperation between the two nations and governments. Ladies and Gentlemen, I think we unanimously believe that international relations developments during the past decade lead countries to broaden regional and global cooperation and, if possible, make bilateral/multilateral arrangements in order to take a role in and enjoy the most out of the regional/global economy. Creating the appropriate structure and system to bear this very issue requires new cooperation and, of course, new definitions for joint economic, cultural, political and social interests. I believe that in fostering the political and economic cooperation between the two countries and joint meetings such as this seminar play a very important role in the formation of suitable evolving structures, systems and definitions.
On the other hand, understanding today's political and economic realities and believing in the "win-win" principle lead us to the fact that just under the auspices of peace and dialogue, all parties interests can be met and maximized. In this line, the Islamic Republic of Iran, in its role as an influential and effective country in the Middle East region and with great potential for establishing, maintaining and extending mutual interests with its counterparts, is ready to expand and strengthen its relations and ties with all countries around the world, especially with whom Iran has had a long history of cooperation.
So in this speech, first of all, I will try to outline the main economic developments during the past two decades and then elaborate on the natural as well as policy-made economic advantages that make Iran a viable location and attractive. opportunity for any foreign investment. I hope that this presentation will be informative and provide the respective audience with the potentials and benefits of doing business in Iran, especially the protected channel of business and foreign investment.
Iran's Economic Status
To put Iran's economy in a proper perspective, we should identity three distinct phases. These are:
An emergency phase of public sector dominance (1979-1988)
Economic reconstruction and adjustment attempts (1989-1997)
Fresh attempts at economic restructuring and reform (1997 onward)
I believe that most of the distinguished audience are familiar with the conditions that overwhelmed economic management in Iran during the first phase, when an unfortunate war was posed on a fledgling republic. In this period, the Government of Iran adopted policies that aimed to maintain vital economic signals while at the same time filling the vacuum left by private sector disincentives for economic activity. Despite substantial challenges, Iran's economy emerged from the first phase free from any international debt, but serious macroeconomic imbalances posed new challenges to economic policy makers.
In this period, Gross Domestic Product (GDP) declined drastically and at the end of this phase Iran's economy contracted with a 7.8% drop in GDP in 1989. Gross National Fixed Capital Formation continued declining in double-digit rates. Large budget deficits were recorded in the past three years, reaching as high as 505 of total budget and nearly 10% of GDP, and finally the inflation rate remained high and reached nearly 30% in 1989.
The second phase of Iran's economy began in 1989 with a cease-fire between Iran and Iraq and the enactment of the first Five-Year Economic Development Plan. This phase covered the period between 1989-1997. The main thrusts of the economic policies in this period could be characterized as:
oPhysical reconstruction
oVital infrastructure development
A major element of physical reconstruction in this period was the rebuilding of 87 small and large, damaged or destroyed cities, This effort allowed the migrant population to be fully resettled in their hometowns..Overall Iran's economy grew at an average rate of 4.5% in the period between 1989-1997. An important trend that developed in the final years of this period was that the non-oil sector of Iran's economy gradually demonstrated greater independence from the oil sector and maintained its growth rate despite declines in international oil markets. Specifically, while the value added in the oil sector contracted by 10% in 1999, the value added in the non-oil sector continued growing by 4.7% during the same year.
On the external sector, Iran's economy experienced an import boom in the early 1990s, which left a large accumulated current-account deficit in the early part of 1994. In order to address obligations to external creditors, the Government imposed a number of control measures on foreign exchanges conversion and imports, which helped create sufficient surpluses for servicing external obligations.
As a result, Iran's total stock of external debt has almost always declined in recent years. Moreover, the profile of external debt has been rationalized where the short-term obligations now constitute a much smaller share of the total debt compared to the medium and long-term obligations.
Allow me to continue by describing the main features of current trends in Iran's economic and political environment. These trends have effectively begun with what can be characterized as the third distinct phase, the highlights of which I present here.
As you may recall, the last two presidential elections of May 23, 1997 and June 8, 2001 marked a bright development in Iran's political scene. The popular support of President Khatami in two consecutive elections has been in many aspects an unrivalled phenomenon, even compared to countries with long-standing democratic systems. Enjoying firm political support, President Khatami embarked on several critical mandates, some of which are listed below:
oDesign and implementation of action plans for further development of the political apparatus in Iran
oFormulation of economic restructuring principles In this framework, the third Five-Year Economic Development Plan has been formulated and approved by Parliament to obtain the following objectives:
oGreater transparency in the macroeconomic regime and regulatory frameworks
oBudget reforms
oTax reforms
oDownsizing of the government's role in economic activities and privatization of government enterprises
oDismantling of monopolies and promoting competitive structures.
oAttraction of foreign investment
oProtecting private sector investments
oAdjusting imbalances in Iran's exchange rate system and moving towards a floating single rate regime
oReduction of non-tariff trade barriers and laying the ground for joining the WTO
oAdoption of a targeted subsidy system in place of the existing general subsidy system and developing a strong social safety net On the way to these reforms, many achievements have emerged and I will try to touch on a few of them:
The blueprint of the comprehensive tax reform, which was comprised of essential changes in the tax code as well as structural reforms in the organization and functionalities of the tax authority was approved in February 2002. The new tax code, which was drafted and proposed by the Ministry of Economic Affairs and Finance, provides for many taxpayer-friendly changes. Among these include:
oElimination of the fixed 10% corporate tax
oFixing corporate income tax at a flat rate of 25%, while under the previous law, companies were subjected to both a 10% corporate tax rate plus their dividends being taxed at levels of up to 54%
oIntroduction of many new tax holidays
oCreation of a central tax authority Furthermore, during the last two years, all of the non-tariff barriers on imports have been removed or replaced by tariffs. In addition, rationalization of the tariff System started in the past year and is being followed up with such good speed, it is expected to pave the way for Iran's joining the WTO very quickly.
Also, it is worth mentioning that since the beginning of the Plan, a privatization agency has been set up in the Ministry of Economic Affairs and Finance and the Parliament has approved regulations governing privatization. All of the 1,039 public sector enterprises have been reviewed for privatization under the supervision of the President, out of which 217 are to remain public, 87 will be liquidated and 735 are slated for privatization. In this line, all of the Ministries are required to sell the shares of the planned-to-be-privatized state-owned enterprises that they control. For instance, the Ministry of Oil will cede 23 firms of its subsidiaries to the private sector over the 3 rd FYDP. These include the National Iranian Tanker Company and the liquefied gas distribution centres.
Likewise, the Ministry of Road and Transportation will cede 15 big enterprises of its subsidiaries to the private sector as a result of the Plan. Among them are the Iran Air and Shipping Line of the Islamic Republic of Iran. In this way, the Government has sold 6961.2 billion Rials (about 870.1 million USD) equivilent to the shares of public enterprises in the Tehran Stock Exchange and it has ceded to workers some 43 million USD worth of shares..With respect to exchange rate system developments, I am glad to announce that from March 2002, after a long period of the least smooth fluctuations in exchange rates, we have entered a unified floating exchange rate system era. It should be noted that for at least three years. Despite many exogenous shocks the economy (e.g. changes in the oil prices, increasing the potential of military operations in the region, etc.) exchange rate fluctuations have remained within less than 2%.
Last year, a new law called the Foreign Investment Promotion and Promotion Act (FIPPA) has been enacted by which the framework for attraction and promotion of foreign investments can benefit from more transparency and compatibility with the latest international standards, the introduction of the updated capital market instruments, broadening foreign investors' fields of activities and definitions, more incentives and facilities for foreign investments and the concentration of all government ministries and agencies in a one-stop shop.
Introduction of huge amounts of public bonds, more discipline in budget planning, more independence for the central bank and many other measures taken together with those mentioned above have created an expanding economy which, as you can see in the tables and diagrams being presented, grew at 5, 5.4 and 6.5% during the past three years and is expected to grow at 6.2, and 7% during the remaining years of the Plan. A dramatic 9% decrease in the inflation rate has emerged within the first two years of the Plan (and may reach 11.4%) while inflationary pressures related to the unification of the exchange rate increased it by 4.4% during the past year. Unemployment has decreased by about 3% during the same period. In the external sector, due to the significant decline in debt repayments (debt stock is now at less than 7.6 billion USD, about 7.5% of total GDP) the overall balance of payments stood at 7.9 billion USD and made current account surplus reach 13% of GDP (the double of the previous year.) Gross official reserves, including the Oil Stabilization Fund (OSF), increased to 12.6 billion USD (about 10 months of imports equivalent).
Regarding the time I have been provided with, I think the above-mentioned information would suffice a relatively accurate image of current economic trends in Iran and now I would like to turn to another key issue, which is the business environment in Iran.
Business Environment in Iran
I believe that the following positive features nominate Iran as an advantageous and competitive location for investment and doing business:
1. Iran enjoys political stability and has one of the most representative system of government within the general geographical location of the Middle East and Central Asia.
2. Iran is at the centre of a large market with a population of 350 million. Many countries in this region are undergoing preliminary stages of economic. development and constitute suitable long-term markets for various products.
Lower costs of transporting goods from Iran to these markets and the benefits of regional trade arrangements, such as those stipulated in the Economic Cooperation Organization (ECO), represent noble advantages, especially for those companies who are going to establish their regional headquarters in Iran.
3. A diversified economy and extensive industry base in Iran has created a large pool of trained and efficient manpower at very competitive costs.
4. Abundance of basic raw materials and especially significant developed and potential natural resources are among the clear and distinct advantages of investment in Iran. I am sure that the respected audience do know that Iran has 93 bbl or approximately 9% of the world's proven oil reserves, 21 trillian cubic meters or 15% of the world's known gas reserves, 1500 million tons of high quality copper, which is the second largest reserve in the world, an estimated 800 million tons of iron, which is the ninth largest reserve on the
globe, the first largest reserve of zinc and so on, and this list can be tripled easily.
5. The low cost transportation, incredibly low costs of energy and public utilities and hence the lower cost of production is another advantage of investment in Iran. To have an idea about the infrastructure costs, consider that every litre of gasoline, refined oil or a cubic meter of natural gas costs merely 1.5 cents.
With respect to water, every cubic meter of municipal lines for water production costs 15 cents while the same amount of well water costs 10 cents. Furthermore every kw/h of grid high voltage electricity costs producers just 2 cents.
6. Another particularly important advantage of investment in Iran is the various extended tax exemptions of which I am going to mention a few of them here.
According to the new tax code:
oThere is no corporate wealth or value added tax in Iran
oAll income derived from agricultural activities are fully exempted from paying any kind of taxes
oProducers can enjoy an 80% tax holiday for a period of 4 years and, if the production is established in a designated underdeveloped region, they will benefit from a 10-year full tax exemption period. The investors and shareholders in these projects also enjoy a similar tax exemption on their dividend income
oHotels, motels and other tourist facilities can benefit from a 50% tax holiday
oIn addition, even after the expiration of the tax exemption, any income derived from exports will be exempted from tax
7. Investors are exempted from paying customs tariffs and commercial benefit tax for plant machinery
8. A full duty drawback system is available in Iran, so that all import charges on raw materials used in export products will be drawn back to producers.
I think the combination of these factors sufficiently supports Iran as an attractive destination for investment..

The Structure of Legal Support for Foreign Investment in Iran
In continuing, I wish to move on to an overview of the legal framework for promotion and protection of foreign investment in Iran and the relevant executive processes.
The FIPPA Act I referred to earlier is the principal legal basis for foreign investment in Iran. According to this law, all foreign real and/or legal persons as well as Iranians using capital with foreign origin, who under authorization from the Government import their capital into Iran, can enjoy the protections and facilities extended by this law.
The protections accorded to foreign investment against non-commercial risk under the law include:
oRight of dividend repatriation in foreign exchange
oRight of repatriation of principal capital and capital gain in foreign exchange
oGuaranteed compensation in case of expropriation and nationalization pursuant to law
oGuaranteed compensation in case of business disruption pursuant to new laws or regulations leading to interruption of foreign investor's financial agreements
oEqual rights on part with any other Iranian national or enterprise It should be noted that in accordance with the provisions of this law, foreign capital is defined in a comprehensive and diversified manner. In other words, foreign capital can enter Iran as:
oCash funds
oEquipment and machinery, spares and raw, additive and auxiliary materials
oPatent rights, technology and know-how, trademarks and names
oSpecialized services In addition, the capital in foreign investments can be imported and receive protection and support under the law in various designations, including equity capital, shareholder's loan, or other forms of foreign financial facilities within legal partnership and/or contractual arrangements. Therefore, in addition to traditional direct investments, other investments within the various forms of non-recourse financing, such as BOT or buyback mechanisms can also enjoy the coverage and support of the law.
Besides, according to the law and the relevant regulations and policies, there is no restriction for foreign shareholding, as long as the foreign capital is going to be invested in the activities that are open to local private investors. It should be noted that even in the fields of activity that are reserved for the Government (which are quite few and mainly limited to very big mines and upstream oil and gas activities) foreign investors are free to invest within the various forms of foreign financial facilities (such as buyback arrangements) and receive the protections and support of the law.

Key Regulations and Competent Authorities
Let me turn to the key regulations, executive processes and competent authorities dealing with foreign investments. The Organization for Investment, Economic and Technical Assistance of Iran (OIETAI), which is an affiliate of the Ministry of Economic Affairs and Finance, is the unique official investment promotion agency (IPA) and is the only responsible governmental body involved in receiving and processing foreign investment applications. The Organization acts as a single-window institution for:
oProviding the investors with all of the required information, including relevant laws and regulations, investment opportunities throughout the country, etc.
oEstablishment of communication between foreign investors and local partners, where necessary
oReceiving and investigating applications
oPreparation of draft forms and submission of the finalized Investment Licenses
oAssistance in communication between foreign investors and local agencies
oAssistance to foreign investors in all relevant affairs e.g. securing visas, residence and work permits for their expatriate staff, etc.
In short, all relevant affairs and requirements of foreign investors are handled through or assisted by the Organization or the one-stop shop centre established therein.
Following application by foreign investors, the Organization submits a report to the Foreign Investment Board, which is comprised of deputy ministers from various line agencies, namely:
oDeputy Minister of Economic Affairs and Finance and President of OIETAI
oDeputy Minister of Foreign Affairs
oDeputy Minister of Management and Planning Organization
oDeputy Governor of the Central Bank of Iran
oDeputy Minister(s) of relevant Ministry (Ministries) as the case requires
Upon approval of the foreign investment applications by the Foreign Investment Board, the Organization formally requests the Minister of Economic Affairs and Finance for endorsement of the foreign investment. An Investment License will accordingly be issued for authorization of each foreign investment case. Generally all key information relevant to the foreign investor's role and participation in investments are reflected in every Investment License. Following issuance of the Investment License, the foreign capital secures legal protection form the Government of Iran and the relevant foreign investor can proceed, alone or in partnership with local entities, to register of a local company in Iran and commerce commercial operation. It is to be noted that Investment Licenses are issued within a maximum period of 45 days from the time an application is placed within the Organization.
Ladies and Gentlemen,
In this presentation, I attempted to brief Iran's main economic trends in the present and future and also recount the advantages of choosing Iran as a location for foreign investment, and review the legal framework and institutional support in the Islamic Republic of Iran for attraction and promotion of foreign investments. Some references also made to foreign elements that influence and facilitate the flow of capital to Iran.
Before ending, I hope that this presentation will positively contribute to the decision of the British business community to choose Iran as a viable location for investment and for the Government of the UK to support such investments.
Thank you very much for your patience. I will be pleased to answer your questions.
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The Right Honourable the Baroness Symons of Vernham Dean, the British Foreign Minister for Commonwealth countries, was the first speaker on the second day of the conference. She also focused her speech on bilateral economic relationships between the two countries and then answered questions raised by the conferees.

The Right Honourable the Baroness Symons of Vernham Dean
British Foreign Minister for Commonwealth countries

Lord Temple-Morris, Ministers, Your Excellencies, ladies and gentlemen.
I am delighted that such a distinguished Iranian trade and finance delegation has been able to visit Britain this week; and that they are able to tell a British audience about Iran's tremendous financial prospects and opportunities.
This visit is a natural development in the relationship between the UK and Iran; a relationship which, I am glad to say, has been steadily improving over the period since we exchanged Ambassadors back in 1999.
I was particularly glad to have the opportunity to meet Mr. Mazaheri yesterday. And the Foreign Secretary, Jack Straw, has just left Tehran after his fourth visit in less than two years and of course the Foreign Minister, Mr Kharrazi, was our guest here in February. I hope this strengthening of ties continues.

UK-Iran relations
We certainly have come a long way since the election of President Khatami in 1997, and the beginning which this signalled of a new phase in Iranian foreign policy. The UK welcomes President Khatami's vision of a democratic, Islamic civil society, based on the rule of law.

Commercial Relations
We believe our bilateral relationship has great potential.
We are all very aware of the huge size of Iran; of its population greater than Iraq, Saudi Arabia and all the Gulf States combined; of its rich history and culture; of its immense natural resources, with the second largest gas reserves in the world and the fifth largest known oil reserves; of its hard-working, highly educated and skilled workforce; of its sophisticated business community; and of the important economic reforms of the past few years.
Most potential investors know of Iran's major oil sector.
But it is not just there that opportunities lie. Other sectors are opening up to international investors:
telecommunications, mining and agriculture, to name but a few. And of course, this commercial and technological engagement benefits Iran greatly, enabling the country to develop its substantial resources; to generate wealth; and to create the hundreds of thousands of jobs needed each year for its young and growing population.
Iran has the potential to be one of the most dynamic economies in the region. Through the economic reform process that Iran has embarked on, through privatisation and through free markets, Iran can become a key player in the global economy. It can also be a catalyst for positive economic change elsewhere. It's easy to see why the attractions of doing business there are growing, as so many British companies recognise.
And this visit is an important part of the process. Mr Mazaheri and his colleagues are looking at how British expertise in financial services, insurance and taxation may help Iran. The visit builds on the Lord Mayor's finance visit to Tehran last year, as well as on negotiations between the UK and Iran on an Investment Protection and Promotion Agreement, and on a Double Taxation Agreement. I had the pleasure of discussing these issues with the Minister and his team yesterday. All in all, this demonstrates how UK/Iran commercial relations have been improving.
Of course, the UK's economic and commercial engagement with Iran goes hand in hand with political engagement. Both are crucial.

Working together in the Middle East
Iran is a vital player in the region. We recognise that Iran has concerns about the situation in Iraq. But we have maintained an open dialogue throughout; and we share, I hope, the goal of a law-abiding and peaceful Iraq helping to promote stability in the region. Iran has an immense amount to contribute and we want to work with her on this.
The UK and Iran have already been working well together in Afghanistan. Iran's role in working towards a stable, peaceful and united country following the removal of the Taliban has been internationally recognised. This co-operation has brought many benefits to all concerned, and most importantly to the people of Afghanistan themselves.
On peace in the Middle East, we understand Iran's legitimate concern for the Palestinian people. We are convinced that a just solution to the Israeli-Palestinian conflict is an important precondition for long-term peace in the region. For this reason, we have taken a lead in pressing for rigorous implementation of the Quartet Roadmap; and in supporting its goal of an independent and viable Palestinian state living peacefully alongside a secure State of Israel by 2005. We hope Iran will be able to use its influence in support of this.
The UK and Iran are also working together very closely on tackling the illicit drugs trade. We are committed to continuing this work, and the UK is Iran's largest donor of anti-narcotics assistance, to a total of over 3.9 million pounds sterling since 1998.
Iran estimates there are two million refugees there. We applaud the work Iran has done on this issue, and the way she has worked with international agencies. We have been helping via the AMAR foundation and through international agencies.
These are some of the concrete steps illustrating how the UK wants to work alongside Iran to promote peace, stability and prosperity in the region.

Constructive engagement
We firmly believe Iran could have a crucial role to play in the family of democracies.
Mr Mazaheri's visit bears witness to our will to engage with Iran. And this motive also underpins our conditional support for an EU/Iran Trade and Cooperation Agreement.
It is because of our policy of constructive engagement that we are able to raise with Iran the various issues which do concern us. The Foreign Secretary will have discussed these fully during his visit to Tehran. We are asking no more of Iran than of any other country: that she lives up to her international commitments so that she can reap the benefits of closer engagement with the international community.
But they do include global problems like the international fears of nuclear weapons proliferation. We and our EU partners believe that the best way for Iran to demonstrate goodwill and transparency is for Iran to sign the Additional Protocol to the Safeguards Agreement. Of course, Iran has some legitimate security concerns and we recognise these. But the answer has to lie in a multilateral security framework rather than in unilateral measures. We hope Iran will cooperate fully with the IAEA to resolve the outstanding issues identified in the IAEA report to the June Board of Governors meeting.
As terrorism becomes increasingly international, it is important that we work with all states, including Iran, to defeat it. And we urge Iran to consider their support for the decision taken by the Palestinian rejectionist groups to hold to a ceasefire so that the beneficiaries of the roadmap are the Palestinian people rather than the enemies of peace.
The EU also has concerns about human rights in Iran. We applaud some recent positive developments and we are willing participants in the EU/Iran Human Rights Dialogue.
But we still hear reports of practices that are unacceptable for a country with Iran's democratic credentials. We value dialogue, we want to do business with Iran and we wish to negotiate agreements. But we and EU partners also need to see real progress on these issues.
As with any meaningful bilateral relationship, differences and problems exist. It is a mark of the strength of our ties that we can speak openly about them.

Concluding remarks
In conclusion, let me say that we are delighted that Iran has shown that it increasingly wants to engage with the UK again during the last few years. We think Iran has so much to gain from a more constructive relationship with the UK and Europe. In regional stability and in building a safer world. We have already begun to demonstrate that we can work extremely well together. Let us continue to do so.
And with its extraordinary potential and unique position in the Middle East, Iran could have a very prosperous financial future. This potential can be fully realised by means of a solid commitment to engage fully with the UK, the EU and the wider world on tackling the issues of real concern to us. This would enable Iran to reap the rich rewards of full membership of the international trade and financial system. And in playing its full part in the world economy, Iran will have a very prosperous financial future.
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Amongst the various other speakers were Dr. Mohammad Hossein Adeli, Deputy Minister at the Iranian Ministry of Foreign Affairs; Mr. Mohammad Reza Nematzadeh, Deputy Minister at the Iranian Oil Ministry, and the Managing Director of the National Iranian Petrochemical Company; Dr. Mohammad Mojarral, Deputy Governor of the Central Bank of Iran; Ms. Vivian Brown, President of the Export Credit Guarantee Department; Mr. Robert Gray, President of Hong Kong Shanghai Banking Corporation; Ms. Rosemary Hollis, President for Middle East Programs of the Royal Institute of International Affairs; Dr. Asgar Fakhreih; Dr. Babak Namazy etc…

Overall it is to be hoped that the matters aired and discussed at the conference may bear very fruitful consequences which could in turn pave the way to advancing bilateral business relationships between Iran and Britain.