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aturday was the implementation day for the Central Bank of Iran’s latest major directive on bank interest rates, which has already created a momentum in the banking system as lenders are scurrying to absorb the maximum number of deposits.

As per the directive, banks and credit institutions were obligated to refrain from paying high interests–that went up to 23%–after September 2, and cap their interests on one-year deposits at the previously set 15% while paying a maximum interest of 10% to short-term deposits.

The directive was issued more than 10 days ago, meaning that the banks were effectively given a legal deadline to retain their status as the most attractive place for making deposits by offering higher interests for one more year. And that is exactly what happened.

Lenders embarked on a frenzied campaign and sent text messages to micro depositors. By directly contacting the macro depositors, they tried to maintain their base and attract more customers.

What is more, firsthand media reports indicate that a number of banks even kept their overcrowded branches open until late Friday–a holiday in which they were supposed to be closed–not to miss out on any potential deposits.

A query by the Financial Tribune from a number of banks both state-owned and private found inconsistencies in adhering to the CBI directive.

While a majority of them said they will not open new deposit accounts with higher interest rates in line with the directive, some of them said they will. For instance, one lender said outright it currently offers 18% interest on deposits higher than 500 million rials ($13,000).

But more importantly, the real getaway loophole to the interest rate crackdown seems to be the investment funds owned by banks and credit institutions.

Even though the eight-part CBI directive clearly states that “deposits made in investment funds” belonging to banks and credit institutions are “also subject to the fixed interest rates devised as part of this directive”, lenders seem to be telling a different story.

Asked by Financial Tribune, a general air of uncertainty presented itself in the way the banks look at the operations of their investment funds, as they claim they are still allowed to and will pay higher interest rates.

However, they add that this might be subject to later changes, if the CBI were to decree it.

  Deposits Stay in Banks

As to the immediate implications of the directive for the banking system, CBI Governor Valiollah Seif has expressed confidence that “we are not worried that deposits will exit the banks”.

“Even deposit rates set at 15% remain attractive for the people as the inflation rate currently stands at 10%, meaning that deposits will not flow into other markets,” he added in a late-night television interview.

Ali Khosroshahi, a senior asset management and investment analyst at Amin Investment Bank, concurs that the deposits are highly unlikely to find their way to the capital market.

“At least in the short-term, deposits will not be moved to the capital market because the customers of the capital and money markets are vastly different and people will not risk their money in the capital market as they are not familiar with it,” he told Financial Tribune.

The only feasible way by which deposits made in the banking sector might enter the capital market in the short term is if previous macro investors who had moved their money to the banks may find stocks more attractive again.  

However, Khosroshahi believes that people may opt to spend their money in other parallel markets such as gold coin, foreign exchange and housing markets.

  Effects of Rate Cuts on Inflation

While there is a general consensus on the necessity of reducing deposit and interest rates among officials, parliament, private sector and pundits, the real effectiveness of rate cuts and the influence of trying to reduce them on other macroeconomic indicators are also of paramount importance.

“I believe that as a result of recent CBI measures, we will witness a rise in the monetary base and see inflation rates in the double digits again by the end of the current year [in March],” Pouya Jabal Ameli, a senior economic analyst, tells Financial Tribune.

As he sees it, the recent directive is aimed at helping the general state of the economy and boosting growth rather than instilling major banking reforms.

“The first aspect of the directive, which is to directly reduce interest rates, will prove to be largely null and ineffective at the end of the day,” he adds, while the second aspect, which is turning the overdrafts made in the interbank market by banks into cheaper credit lines with 18% interest rates, will prove more beneficial.

But even those benefits will help reduce the rates in the short term because two major problems will prevent meaningful and long-lasting rate cuts.

“As a result of the lenders’ capital shortage and major issues in their balance sheets, this decrease in bank interest rates will be short-lived,” Jabal Ameli predicts.

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ran's oil industry will experience a big leap in the next two years, as international energy majors have shown great enthusiasm in playing a role in the country's oil and gas ventures, the deputy oil minister for international affairs said.

"Attraction of foreign investment has turned out to be a serious competition in the world since not only financial resources are limited but there are also lots of calls for financing," Amirhossein Zamaninia was also quoted as saying by ISNA on Saturday.

According to Zamaninia, attracting foreign investment is contingent upon a wide range of factors, the most important of which is the political climate of countries.

"Compared to neighboring countries such as Iraq, Iran is safe and politically stable enough to attract foreign investment," he added, expressing hope that ongoing talks with multinationals yield positive results as they are approaching the final stretch to develop the country's massive hydrocarbon reserves.

"Another important issue is the model of contracts and winning the trust of global investors who need to be ensured of a safe investment in Iran in the long run," he said.

Pointing to the recently signed contract between NIOC and French energy giant Total S.A. to develop Phase 11 of the South Pars Gas Field in the Persian Gulf, the official said, "Should technical talks go well, the finalization of an agreement will not take long."

Stressing that Iran has the opportunity to clinch more deals with foreign firms, he said despite the country's century-old petroleum industry, Iran's hydrocarbon output is not in proportion to its reservoirs.

"Talks are underway with 28 oil majors to expand 28 oil and gas fields and we look forward to finalizing the contracts in the current fiscal (ends in March 2018)," he said.

Asked about the Iranian National Oil Company's plan to conclude 10 agreements by March next year, he said that to save time, parallel negotiations are being held with international companies, including Russia's largest private oil company Lukoil, China National Petroleum Corporation and Indonesia's state-owned oil firm Pertamina.

"A large number of enterprises have already submitted their master development plans and NIOC's committees are studying technical, financial and legal terms," he said.

-- Russia's Partnership

The official noted that Russian firms are following the talks more seriously, that is why it is very likely that the next deal will be signed with a Russian energy major in two months.

Iran is currently in active negotiations with Russia’s gas giant Gazprom on a number of large-scale projects.

On the prolonged process of signing the first oil development contract with foreign firms, Zamaninia said domestic disagreements among different parties and stakeholders as well as putting personal interests before national concerns would further postpone the oil and gas deals.

"Our neighboring states such as Qatar and Iraq are extracting the lion's share of joint oil and gas reserves and further procrastination and lack of consensus among policymakers will impose heavy financial losses," he said, adding that internal conflicts could serve as a deterrent to Iran's key petroleum sector.

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Tehran Stock Exchange’s main index gained 155.30 points or 0.19% to end Saturday trade at 83,428.2.

About 434 million shares valued at $61.64 million changed hands for the day.

Trading at TSE and Iran Fara Bourse starts on Saturday and ends on Wednesday.

Ma Insurance was the biggest riser, going up 4.96% to 1,734 rials per share.

Behceram Company incurred the biggest loss among all TSE-listed companies, as it went down 4.99% to 3,617 rials per share.

Persian Gulf Petrochemical Industries Company gave the biggest boost to the benchmark, followed by Esfahan Oil Refinery and Khouzestan Steel Company.

Mobarakeh Steel Company weighed the most on TEDPIX, followed by Golgohar Mining and Industrial Company and Pars Oil Company.

The Price Index added 50.40 points or 0.19% to close at 27,026.6. The First Market Index gained 13.10 points or 0.02% to post 58,628. The Second Market Index won 1,001 points or 0.56% to reach 180,919. The Industry Index was up 141 points or 0.19% to register 72,449.5. The Free Float Index dropped 45.52 points or 0.05% to hit 91,818.40. The TSE 30 gathered 1.50 points or 0.04% to settle at 3,402 while the TSE 50 scored 11.30 points or 0.35% to finish at 3,269.2.

 IFX Inches Up

Iran Fara Bourse’s main index IFX gained 0.61 points or 0.06% to close Saturday trade at 954.07.

Close to 220.9 million securities valued at $23.01 million were traded at the over-the-counter exchange for the day.

Esfahan Steel Company witnessed the highest number of traded shares, as 55.16 million of its shares changed hands.

Kerman Development and Construction Investment Company had the highest trade value as $1.61 million of its shares were traded.

Kerman Development and Construction Investment Company, MobinOne Kish and Kosar Insurance registered the highest value increase.

Shomalshargh Shahrood Industrial and Mining Company, Behpak Industrial Group and Bahman Leasing Company suffered the biggest decline.

Zagros Petrochemical Company, Kerman Development and Construction Investment Company and Hormozgan Steel Company had the most positive impact on the IFB benchmark.

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An unnamed German company has preordered a batch of methanol to be produced in Marjan Petrochemical Complex in Pars Special Economic Energy Zone near Asalouyeh, managing director of the zone said.

“Marjan Petrochemical Company has received an order for selling methanol to a German firm,” Hassan Beigi was quoted as saying by NIPNA, the NPC’s official news agency, on Saturday.

He did not refer to the volume of order or its delivery date, but the order comes as Marjan complex is still under development.

"The construction of Marjan complex has made over 96% physical progress," Beigi said, adding that the complex is planned to start production in the current Iranian year that ends in March 2018.

Marjan Petrochemical Complex is designed to produce 1.65 million tons of methanol once it becomes fully operational. It will receive feedstock from South Pars refineries.

In addition to Marjan, the first phase of Bushehr Petrochemical Complex and Kaveh Methanol Company, set to become the world's biggest methanol plant, is expected to go on stream in the current Iranian year.

Officials say Iran’s total methanol production capacity will double following the launch of the three methanol plans, exceeding 10 million tons per year.

Marjan and Kaveh plants were initially slated for launch in 2016.

The Petrochemical Research and Technology Company of Iran signed a memorandum of understanding last month with France's Air Liquide Engineering and Construction Company on transferring state-of-the-art technology to convert methanol to propylene. Plans call for increasing total production of propylene to 4 million tons per annum in 2021 and 8 million tons within the next decade.

Iran is forecast to produce 56 million tons of petrochemicals by March 2018, almost 10% higher than last year's level that exceeded the 50-million-ton mark. Nominal production capacity is set to reach 72 million tons.

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ehran Stock Exchange’s main index gained 155.30 points or 0.19% to end Saturday trade at 83,428.2.

About 434 million shares valued at $61.64 million changed hands for the day.

Trading at TSE and Iran Fara Bourse starts on Saturday and ends on Wednesday.

Ma Insurance was the biggest riser, going up 4.96% to 1,734 rials per share.

Behceram Company incurred the biggest loss among all TSE-listed companies, as it went down 4.99% to 3,617 rials per share.

Persian Gulf Petrochemical Industries Company gave the biggest boost to the benchmark, followed by Esfahan Oil Refinery and Khouzestan Steel Company.

Mobarakeh Steel Company weighed the most on TEDPIX, followed by Golgohar Mining and Industrial Company and Pars Oil Company.

The Price Index added 50.40 points or 0.19% to close at 27,026.6. The First Market Index gained 13.10 points or 0.02% to post 58,628. The Second Market Index won 1,001 points or 0.56% to reach 180,919. The Industry Index was up 141 points or 0.19% to register 72,449.5. The Free Float Index dropped 45.52 points or 0.05% to hit 91,818.40. The TSE 30 gathered 1.50 points or 0.04% to settle at 3,402 while the TSE 50 scored 11.30 points or 0.35% to finish at 3,269.2.

 IFX Inches Up

Iran Fara Bourse’s main index IFX gained 0.61 points or 0.06% to close Saturday trade at 954.07.

Close to 220.9 million securities valued at $23.01 million were traded at the over-the-counter exchange for the day.

Esfahan Steel Company witnessed the highest number of traded shares, as 55.16 million of its shares changed hands.

Kerman Development and Construction Investment Company had the highest trade value as $1.61 million of its shares were traded.

Kerman Development and Construction Investment Company, MobinOne Kish and Kosar Insurance registered the highest value increase.

Shomalshargh Shahrood Industrial and Mining Company, Behpak Industrial Group and Bahman Leasing Company suffered the biggest decline.

Zagros Petrochemical Company, Kerman Development and Construction Investment Company and Hormozgan Steel Company had the most positive impact on the IFB benchmark.

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The Center for Strategic Studies, affiliated to the Presidential Office, has published a report that proposes 10 strategic measures for the housing sector to achieve prosperity without inflationary effects.

These moves are aimed at easing the process of buying an apartment for first-time homebuyers, reducing the population of those living in unfavorable conditions, managing distressed areas and ending the issue of informal settlements, Fars News Agency reported.

The plan, which has been devised with respect to five major issues of the housing sector during 2012-16 and the opinions of the sector's experts to correct the flaws of the previous roadmap, suggests moves that should be implemented during the upcoming four years to end the recession in housing construction and sales.

Crucial Measures

"Making home loans flexible" is the first move proposed by the report.

Offering a variety of home loans will enable all groups of the society with different economic conditions to benefit from bank home loans.

In this regard, CSS has devised a plan for reforming the home loan system and presented it to the agent bank and the monetary policymaker, i.e. the Central Bank of Iran.

The report marks the "expansion of secondary mortgage market" as the second measure. As the report elaborates, the agent bank can issue participatory bonds for its allocated loans and recover a portion of its primary resources that enable it to offer a bigger volume of loans.

Thus far, Bank Maskan, as the agent bank of the housing sector, has paid out about 1 quadrillion rials ($25.7 billion) worth of loans, which will be repaid in monthly installments over 12 to 15 years. The bank's lending power will be multiplied, if it manages to recover a significant amount of its resources by issuing second mortgage participatory bonds.

The third measure has been referred to as "establishing housing leasing market" to provide average and high-income families with appropriate home loans. The move can affect the market of more expensive homes that have experienced even worse days than other residential units during the years of recession.

"Prevention of selling government lands" has been mentioned in the report as the fourth move to lead the housing market toward prosperity. To do so, the agent bank can issue participatory bonds–backed up by government lands—to absorb the required investments from the private sector to build infrastructures without giving away the government's share from the added value of the lands.

"Leading construction companies and builders to distressed areas" is another measure that allows construction companies to rebuild a whole neighborhood and not just a few old houses. This way, their operations will not be limited to residential units.

"Managing housing sector's deterrent regulations" is also suggested by CSS to housing sector policymakers. For instance, revising the regulations of apartments' pre-sales has been suggested, which can significantly help builders and the housing market.

One of the most important strategic points has been enumerated as "solidification and unification of plans and policies in the housing sector" which suggests the merger of different policymaking bodies in the Ministry of Roads and Urban Development in order to prevent any contradicting policies.

Presidential office's Center for Strategic Studies calls for utmost cooperation among internal and external responsible bodies of housing sector to see the merger through.

"Precise implementation of social housing scheme", along with "matching supply with demand", has also been emphasized in the report.

CSS also refers to a so-called "construction tsunami" that happened between 2009 and 2012 as the major reason for recession in the construction sector in the following years.

The report has enumerated three factors that caused the heavy flow of construction efforts.

According to the report, private sector, organizations and banks made huge investments in the housing sector during the years when banks' interest rates were very low.

On the other hand, CBI used its huge resources in the Mehr Housing scheme, which resulted in the construction of thousands of residential units. The third reason behind the tsunami concerns municipalities as they sold many construction permits for buildings' extra levels.

These three factors triggered the construction of many residential units, which are in stark contrast with the demand in society and resulted in the most severe construction recession in the history of housing sector.  

 

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Iran trilateral energy deal to boost foreign participation, market access: Official

Tehran, Sept 2, IRNA – The August oil agreement between Iran, Russia and Turkey is aimed at fostering participation in financing and developing Iranian oil and gas projects and providing Iran with access to the international markets, an oil official said.

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The trilateral oil deal was inked in August 2017 in the Russian capital in the presence of the senior officials of the three countries, Abdolreza Hosseinnejad told the Islamic Republic News Agency (IRNA) during an exclusive interview on Saturday.  

The parties involved in the trilateral deal included Iran's Ghadir Investment Company, Russia's Zarubezhneft and Turkey's Unit International, Hosseinnejad said.

According to the oil deal, the three investors have agreed to administer together all the technical and economic activities related to execution of oil and gas projects, he said.

They are also expected to cooperate on creating leading economic-technical teams, he added.

Based on Iran's new oil deals, the Iranian companies should seek partnership with foreign companies, pioneering in technical know-how, Hosseinnejad said.

He went on to say that the parties of the deal have also agreed that any foreign company which is willing to be engaged in the Iranian projects, should be accompanied by an exploration and production (E&P) company from Iran. 

'Such interaction with the international companies will lead to success and growth of domestic companies,' the official said.  

A member of Society of Iranian Petroleum Industry Equipment Manufacturers (SIPIEM), Neda Mousavizadehgan said at a press briefing in May that the ground has been prepared after the July 2015 nuclear deal for development of cooperation between Iran and the reputable international companies.

According to SHANA, the new oil deals based on Iran Petroleum Contract (IPC) is expected to replace buy-back contracts.  

Under a buy-back deal, the host government agrees to pay the contractor a fixed price for the entire volume of hydrocarbons it produces.

However, the IPC requires the National Iranian Oil Company (NIOC) to set up joint ventures with international companies in oil and gas production. In addition, the foreign firms will receive a share of the output.

1483**2044

Follow us at @IrnaEngish on Twitter

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Germany inks deal for purchase of methanol from Iran

Tehran, Sept 2, IRNA – Managing Director of Marjan petrochemical industry Hassan Beygi announced on Saturday that a German company has signed a contract for in-advance purchase of methanol from Iran.

n82652801-71846448.jpg

He said that the plant has more than 96 percent physical progress in construction and will start to produce its products in the current year.

Hassan Beygi said that by this contract all financial resources needed to complete Marjan Petrochemical Industry has been provided.

He added that after signing the contract all expenses for investment in the project will be returned in 2 years.

Marjan Petrochemical will has annual production capacity of 1.650 million tons methanol, in case of full operation, and is to be fed by South Pars Refineries.

It is predicted that three new plans to produce methanol to be commissioned this year, included Marjan Petrochemical, first phase of Bushehr Petrochemical and Kaveh Petrochemical, as the largest methanol production plan in Iran and the Middle East, so by commissioning these three plants Iran methanol production will pass 10 million tons annually.

1391**2050

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The US dollar once again gained against rial in Tehran’s both open and official exchange markets on Saturday to maintain its uptrend against the Iranian currency.

According to Tehran Gold and Jewelry Union’s website, the greenback, which is the most widely traded currency in Tehran’s foreign exchange market, changed hands for 38,820 rials and 33,246 rials in open and official markets on Saturday respectively.

The US dollar started its rally three weeks ago when its value in Tehran’s open market hovered around 38,110 rials and gained about 710 rials during the period to reach its highest value in Iran’s forex market since the beginning of the new Iranian year on March 21.

Euro, another high-demand currency in Tehran’s market, registered a 50-rial growth compared with Thursday’s close. The rial was quoted at 47,220 to the euro.

Other high-trade currencies in Tehran’s market, namely Turkish lira and Emirati dirham,

 which traders significantly use in transactions with these countries, also witnessed growth.  Lira and dirham changed hands for 11,620 rials and 10,650 rials, respectively.

The rally in the foreign exchange market comes as the Central Bank of Iran is expected to make a move toward its longstanding pledge of floating the rial.  

In line with the forex market, all kinds of gold coin have also registered significant leaps in Tehran’s market on Saturday.

Bahar Azadi, the benchmark gold coin, gained 250,000 rials or 2.07% on Saturday to change hands for 12,320,000 rials ($320). Emami gold coin was traded for 12,538,000 rials ($325.6), marking an increase of 275,000 rials or 2.24% compared to Thursday’s close.

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More than 124.4 trillion rials (close to $3.21 billion) worth of investments were made in Kish Free Trade Zone during the first presidential term of Hassan Rouhani (August 2013-17), the deputy head of Kish FTZ said.

Ali Jirofti added that about $120 million of the total sum pertain to foreign investment, IRNA reported.

Jirofti noted that exports from FTZ rose from $54.7 million in 2013-14 to $137 million last year (ended March 2017).

Medical equipment, pharmaceuticals, oil products, cosmetics and toiletries were the main goods exported from Kish over the four-year period.

Kish is a 91.5-square-kilometer resort island in the Persian Gulf located 18 kilometers off the southern coast of Iran in Hormozgan Province.

 

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As if the recent gold rally was not enough of a surprise, the precious metal continued to gain in strength in Tehran's market–this time fueled by the Central Bank of Iran's decision to get tougher on the interest rate cut's implementation.  

With deposit rates coming down from their historic high, investors are being stripped from one of their safest havens, namely bank deposits, and showing a renewed preference for the bright metal.

However, the effect has been less dramatic than expected, as many investors are still reluctant to desert the stable monetary market for other volatile ones and lenders are coming up with innovative methods to circumvent the CBI decree.

The deputy head of the Tehran Gold and Jewelry Union confirmed that the volume of demand for the valuable metal has hiked.

"It must be noted that a portion of this demand is because bank interest rates have been reduced and the people are now more inclined to turn their savings into gold," Ayat Mohammadvali also told IRNA.

Nearly two weeks ago, CBI announced that as of September 2, all banks and credit institutions should refrain from offering interest on deposits higher than the previously decreed 15% while capping their interest on short-term deposits at 10%.

In the runup to the implementation date, banks scrambled to attract as many deposits possible by inviting customers to renew their contracts before the decree kicked in and thereby postponing the real effect of the rate cuts being felt by at least another year.

However, in the absence of a developed capital market, some decided that they no longer find the lower deposit rates attractive and moved their money to other parallel markets such as the gold and coin markets that are the next popular options, along with the currency market, for many Iranians.

On Saturday, Bahar Azadi, the benchmark gold coin, gained 250,000 rials or 2.07% to fetch 12,320,000 rials ($320). Emami gold coin was traded for 12,538,000 rials ($325.6), marking an increase of 275,000 rials or 2.24% compared to Thursday's close.

According to TGJU's website on Sunday, Bahar Azadi gained another 10,000 rials and was exchanged at 12,430,000 rials ($322.8) while Emami was traded at 12,694,000 rials ($329.7) to register a multiyear record.

But as Mohammadvali says, a gold bull run is temporary, adding that some influential factors in global markets such as the rise in foreign debts of the US government and an uptick in US unemployment have had an impact on gold prices, which drove it up to $1,325.

Among other psychological effects impacting the gold market, he referred to the seasonal demand for gold coins on the occasion of Eid al-Adha and the approaching feast of Eid al-Ghadir.

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The National Development Fund of Iran, the national sovereign fund established in 2011, has published a comprehensive report on the first five years of its activity up to March 20, 2017.

NDFI has allocated close to $35 billion in foreign exchange loans for national projects during this period, most of which has been offered through the organization’s agent banks.

As the report indicates, the energy sector and its affiliated industries have accounted for more than $28 billion of NDFI’s allotted resources, which constitute 80.2% of the total.

Upstream oil and gas projects that explore and produce crude oil and natural gas have pocketed the lion’s share of NDFI’s credits. Oil and gas upstream industries have collected $16.77 billion of the sovereign wealth fund’s resources, which equal 48% of the total. Up to this point, $5.5 billion of the earmarked resources have been paid.  

The funds were used in 11 projects. Private sector and non-government companies affiliated to public organizations respectively took $9.9 billion and $6.8 billion.

More than $2.8 billion have been considered for 10 petrochemical projects, but so far only 5 of them have managed to finalize their credits at $1.2 billion–$149 million of which have been paid in full.

NDFI also allocated $3.7 billion for the development of four refineries during the period. All of the four refineries finalized their credits and received $870 million by the end of the aforementioned period.

Petrochemicals and refineries collectively took in close to 19% of NDFI’s credits that amounted to $6.5 billion. Private sector projects accounted for $4.9 billion while $1.6 billion have been considered for the projects of quasi-government companies.

Power plant projects have also accounted for a significant share of the sovereign wealth fund’s proffered resources. A sum of $4.3 billion has been allocated for 43 power plant projects during the six-year period. So far, $2.7 billion worth of funds have been offered to 28 of these projects, $1.2 billion of which have been disbursed.

Of the 32 steel projects for which $2.4 billion had been provisioned, 26 of them managed to finalize their funds worth $1.5 billion. However, 25 of the projects managed to receive $739 million of the promised credits.

Private sector is again responsible for the implementation of most of the projects–around 75% in this field.

The value of credits earmarked for other national projects in fields like cement and tile, downstream oil and gas industries and transportation reached $4.8 billion to support 211 projects. This is while 152 of the projects managed to pocket $1.45 billion worth of credit from NDFI’s resources.

 Agent Banks

NDFI uses agent banks to distribute its resources to each eligible national project.

Among the agent banks, Bank Mellat has doled out the biggest amount of credits. The bank has allotted $9.6 billion during the six-year period, which accounts for 27.7% of all NDFI resources.

This is while Bank of Industry and Mine has been the frontrunner when it comes to the number of individual loans. The bank doled out funds to 209 projects that account for 65% of all projects that benefited from the development fund. The bank’s allotted credits also accounted for 21.2% of all allocated funds.

Bushehr and Khuzestan provinces, because of their vast oil and gas fields, accounted for the biggest share of the sovereign wealth fund’s credits among all the provinces, accounting for 25.8% and 20.9% of the total sum, respectively. The provinces of Fars, Hormozgan and Ilam also owned 6.95%, 6.32% and 5.25% of all the offered credits respectively.

NDFI has also made both foreign exchange and rial investments in private and state-owned banks during its six-year history. The value of forex investments reached $6.6 million while investments in local currency topped 110 trillion rials ($2.86 billion).

The goal of establishing NDFI was to save resources when the government earns abundant revenues, especially from oil and gas sales, to use them in line with plans and needs when revenues drop, especially at times of oil price slump.

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Tuesday, September 05, 2017

CBI’s Six-Point Roadmap on Foreign Finance Projects

 

In his latest directive to the chief executives of banks, Governor of the Central Bank of Iran Valiollah Seif has laid down guidelines on how to spend any absorbed foreign finance to optimally boost national growth.

Owing to the significance of foreign finance for the Iranian economy, in his missive which contains six points, Seif directs the CEOs to focus on profitability and return of investment while paying attention to planning and forethought.

“As you are very well aware, one of the main goals of the banking system is to help the growth and development of national economy, and finance construction and production projects through local and foreign resources,” Seif  wrote in the directive reported by the official news website of CBI.

To achieve an 8% GDP growth rate earmarked as part of the Sixth Five-Year Development Plan (2017-22), he adds, $20 billion in foreign finance have been considered.

In line with this goal, officials have been hard at work to reestablish foreign credit lines and accept foreign finance while “we are now witnessing that foreign finance deals are struck with international banks”.

The latest and biggest foreign finance deal was finalized last month with South Korea whose Korea Export-Import Bank (Kexim) is to provide €8 billion to finance Iranian projects while the Korea Trade Insurance Corporation (K-Sure) is to insure up to €5 billion of risks for Korean businessmen working in Iran.

But more recently, the head of the Organization for Investment, Economic and Technical Assistance of Iran announced that foreign finance deals worth about $30 billion will be clinched soon.

“Deals worth $29-30 billion will be signed with four European countries and an Asian country by next month,” Mohammad Khazaei also said at the 28th Annual Islamic Banking Conference held in Tehran on August 29.

On the other hand, while a more realistic target of $20 billion in foreign finance has been earmarked in the nation’s development plan, as the head of the Tehran Chamber of Commerce, Industries, Mines and Agriculture said in a private sector meeting on Monday, the country “needs to absorb $50 billion in foreign finance a year”.

The CBI governor in his directive to bank CEOs stresses that to improve the risk rating of the country, “the attracted foreign funds must strictly be used to finance projects whose technical, financial and economic evaluations have been completed and whose profitability and ability in returning the loans on time has been approved by the agent bank”.

Seif noted that projects, whose ability to pay back the foreign loans by the time of their maturity is in doubt, should not be able to use the funds.

“It is mandatory that before signing foreign finance deals, [agent banks] make assurances that all the necessary internal permits have been obtained and the projects adhere to regulations on maximizing productive capabilities,” he said.

As his third point, Seif stresses that a strict and sustained supervision over the implementation of projects that use foreign finances is obligatory and banks must adopt timely disciplinary measures should they see any deviation in the allocation of funds.

In this regard, he adds, “banks must draft cyclical reports on the physical progression and the implementation process of the projects” without specifying a timeline.

To fully manage and execute the contents of foreign finance deals, the CBI governor directs the chief executives to come up with detailed operational plans and choose an expert and efficient workforce.

In cases where employers, contractors or other related persons are obligated to make commitments regarding the projects and their implementation based on the foreign finance deals, “banks are legally bound to write down the specific conditions in the deals signed with customers and exert precise oversight”.

In line with this, the central bank chief calls on the banks to draft their deals in a way that will give them enough authority to make the other end of the deal stick to its commitments.

As his last point, Seif notes that “it is mandatory to receive necessary and sufficient collaterals from the applicants of foreign finances” because should they find themselves unable to provide the rial or foreign exchange amounts at the time of the deal’s maturity, “it would undermine the banks’ commitments to repay the installments of the received loans on time”.

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The twin banking reform bills devised by the government are now being assessed in Majlis Economic Commission and will be ratified in open sessions by December, a member of the commission announced.

"The government sent us the bills a few weeks ago and Majlis Economic Commission is to hold intensive meetings to finalize the bills and send them to the parliament's open session for the lawmakers' approval," Seyyed Farid Mousavi was also quoted as saying by ICANA, the official news outlet of the parliament.

President Hassan Rouhani delivered the Banking Reform Bill and the Central Bank Bill to Majlis Speaker Ali Larijani on August 16.

The bills have had a rocky journey on their way to the parliament and underwent many reviews and revisions before they were approved by the Cabinet on July 23. The repeated delays had angered many lawmakers who threatened to ratify their own version of the reform agenda if the government continued its foot-dragging.

The member of the commission added that the structure of the banking system and the Central Bank of Iran, plus their operations and supervisory tools, will be assessed based on the successful experiences of other countries in their banking sectors and Iran's maturity in Islamic banking.

The Banking Reform Bill is the new blueprint expected to replace the current Usury-Free Banking Law. The last amendments to the Usury-Free Banking Law were made in 1983 while the law itself specifies that upgrades are needed every five years.

"We have gathered experts' opinions regarding the bills through many meetings to present them to the banking system and the economic apparatus," Mousavi said.

However, he added that this is only the first step toward reforming the banking system and other banking issues also need to be resolved.

Mousavi noted that the banking task force affiliated with the commission convened meetings from last Tuesday in Mashhad to assess the twin bills.

The Banking Reform Bill outlines the procedures for banks and non-bank credit institutions to follow for obtaining a license from CBI. It explains all banking operations and services, notifies regulations for the establishment of foreign bank branches and sets limits on their investments.

Other articles put in place a professional set of criteria for appointing new top executives and board members, and makes provision for setting up internal risk and auditing committees while detailing lending and capital adequacy rules.

On the other hand, the Central Bank Bill, whose law was first passed in 1972, aims to update banking regulations. Improving the independence of CBI, enhancing monetary policymaking and enforcing CBI’s supervision over the money market are among its key goals.

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According to Article 28 of the Sixth Five-Year Development Plan (2017-2022), the government’s current spending should reduce by 5% by the end of the next fiscal year (March 2019), the head of Planning and Budget Organization of Iran said on Monday.  Mohammad Baqer Nobakht added that the traditional approach to budget drafting will undergo a considerable reform this year, as all spending will be calculated based on the end-price of the services public agencies deliver over the year.

"The allocation of budget to each governmental body will be made according to their performance as well as the objectives and missions they have defined for their organization," he said.  

According to Nobakht, who is also the government's spokesman, the government’s operating budget increased by 72% between 2013-14 and 2017-18, IRNA reported. Earlier, Nobakht said the government is expected to run up a 370-trillion-rial ($9.6 billion) budget deficit in the current fiscal year (March 2017-18).

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 Time: 14:45

Iran needs $50b foreign investment: Chairman

Tehran, Sept 4, IRNA - Iran requires attracting 50-billion-dollar foreign investment to achieve economic development and stability, Chairman of Tehran Chamber of Commerce, Industry, Mine and Agriculture said.

n82654657-71850169.jpg

Long-term sanctions imposed on Iran have disconnected Iran from the world in the economic fields and we were not able to take advantage of markets, technologies and foreign investment, Masoud Khansari said.

After the implementation of Iran

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 Time: 14:45

Iran needs $50b foreign investment: Chairman

Tehran, Sept 4, IRNA - Iran requires attracting 50-billion-dollar foreign investment to achieve economic development and stability, Chairman of Tehran Chamber of Commerce, Industry, Mine and Agriculture said.

n82654657-71850169.jpg

Long-term sanctions imposed on Iran have disconnected Iran from the world in the economic fields and we were not able to take advantage of markets, technologies and foreign investment, Masoud Khansari said.

After the implementation of Iran

  • Upvote 1
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 Time: 14:45

Iran needs $50b foreign investment: Chairman

Tehran, Sept 4, IRNA - Iran requires attracting 50-billion-dollar foreign investment to achieve economic development and stability, Chairman of Tehran Chamber of Commerce, Industry, Mine and Agriculture said.

n82654657-71850169.jpg

Long-term sanctions imposed on Iran have disconnected Iran from the world in the economic fields and we were not able to take advantage of markets, technologies and foreign investment, Masoud Khansari said.

After the implementation of Iran's nuclear deal also known as Joint Comprehensive Plan of Action (JCPO), Iran regained market access, he added.

Khansari went on to say that over 200 political and trade delegations visited Iran during the past two years most of whom were eager to invest in Iran.

Iran's strategic position, its being neighbor with 7 countries, its population, its connection with regional market, it security and educated youths have pave the way for investment in Iran, he noted.

Translator: Ali Izadi

9376**2050

Follow us on Twitter @IrnaEnglish

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Iran tourism booming amongst the young folks.  Yup. :cheesehead:

 

Link: http://money.cnn.com/2017/09/05/news/economy/iran-tourism-boom/index.html

 

Iran's tourism industry is booming

by Zahraa Alkhalisi   @CNNMoneySeptember 5, 2017: 12:16 PM ETng tourists flock to Iran
 

Once off limits to many because of international sanctions, Iran is making a big comeback as a tourist destination.

More than 6 million people visited Iran in the year ending March 2017, up 50% on the previous year and three times the number in 2009, according to official data.

The surge in visitors follows the 2015 nuclear deal between Tehran and world powers that resulted in many sanctions being lifted early the following year.

European airlines such as British Airways and Lufthansa (DLAKY) resumed direct flights to the country, and Iranian authorities relaxed visa requirements. And as more people arrive, demand for accommodation is skyrocketing.

That's creating opportunities for local entrepreneurs and foreign businesses.

Unlike some Western firms, who are reluctant to invest in Iran because they fear President Trump could yet torpedo the nuclear deal, international hotel chains are moving fast to meet the need for more rooms.

Related: The ride-hailing app that rules Tehran's busy streets

France's Accor (ACCYY) was the first chain to open in Iran in 2015. It now operates two hotels there.

Spain's Melia (SMIZF) will open its first hotel next year. Rotana of the United Arab Emirates also has one hotel in the pipeline for early next year and plans three more by 2020.

EasyHotel, a U.K.-based budget chain, is reported to have signed a deal in July to deliver 500 rooms. It did not respond to a request for comment.

And the market clearly has room for many more players. Iran wants to attract more than 20 million visitors by 2025, according to the state tourism agency.

iran persepolis 2 The Naqsh-e Rostam necropolis northwest of Persepolis, near Shiraz in southern Iran.

 

Many of the new visitors are young backpackers from Europe and Asia, drawn by Iran's history and culture. The most popular destinations include the ancient cities of Esfahan and Shiraz. It's also home to Persepolis, a UNESCO World Heritage site.

Many of those travelers are looking for budget accommodation, said Jalal Rashedi, who runs five hostels across the country. He offers bed and breakfast for as little as $15 a night, including internet access.

iran esfahan 2 Naqsh-eJanan Square in Esfahan, Iran.

 

Trump keeps scaring investors away from Iran

"During the past few years we have had a rise in the number of tourists who are young, and they're individual travelers," he told CNN. "They're young, curious, adventurous people who want to discover the truth about Iran, and they mostly stay at hostels."

A World Economic Forum report earlier this year named Iran as the world's cheapest travel destination.

But travelers still face obstacles.

Americans, Brits and Canadians need to apply for a visa in advance, while citizens of many other Western countries can get one on arrival.

iran azadi tower Azadi Tower in the Iranian capital, Tehran

 

And because some sanctions remain in place, the country has few links to international banking networks and Western credit cards won't work there.

That means it can be difficult to make payments in advance to secure reservations. To get around that, Rashedi launched a website to allow travelers to make reservations at his hostels, and those operated by others, without payments.

-- Amir Daftari contributed to this report.

Edited by Freedomwish
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28 minutes ago, Freedomwish said:

Iran tourism booming amongst the young folks.  Yup. :cheesehead:

 

Link: http://money.cnn.com/2017/09/05/news/economy/iran-tourism-boom/index.html

 

Iran's tourism industry is booming

by Zahraa Alkhalisi   @CNNMoneySeptember 5, 2017: 12:16 PM ETng tourists flock to Iran
 

Once off limits to many because of international sanctions, Iran is making a big comeback as a tourist destination.

More than 6 million people visited Iran in the year ending March 2017, up 50% on the previous year and three times the number in 2009, according to official data.

The surge in visitors follows the 2015 nuclear deal between Tehran and world powers that resulted in many sanctions being lifted early the following year.

European airlines such as British Airways and Lufthansa (DLAKY) resumed direct flights to the country, and Iranian authorities relaxed visa requirements.

Tr

A World Economic Forum report earlier this year named Iran as the world's cheapest travel destination.

But travelers still face obstacles.

Americans, Brits and Canadians need to apply for a visa in advance, while citizens of many other Western countries can get one on arrival.

iran azadi tower Azadi Tower in the Iranian capital, Tehran

 

And because some sanctions remain in place, the country has few links to international banking networks and Western credit cards won't work there.

That means it can be difficult to make payments in advance to secure reservations. To get around that, Rashedi launched a website to allow travelers to make reservations at his hostels, and those operated by others, without payments.

 

 

 

  Good to know ahead of time.

 

  pp

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