IranDaily.gif IranDaily.gif
Domestic Economy
Sun, Apr 27, 2008

Advanced Search
PDF Edition
Domestic Economy
Middle East
International Economy
Arts & Culture
Newcomers in Bourse
Indians Will Discuss Details of Rail Link
Confab to Promote Petrochem Sector
Bank Profit Rates Revisited
Chabahar FZNeeds Airport
Trade Team
To Visit Bahrain
Foreign Reserves Improve
S. Korea Buying Less Oil

Newcomers in Bourse
Private banks which considered bourse as a proper venue for making profits, transferred part of their capitals to this sector in the form of investment companies.
One of the main challenges of Bourse Organization is to draw new capital.
Following a recession in bourse in 2003, many investment companies channeled liquidity to purchasing land and investing in the housing sector, particularly in the past two years. This made the need for attracting new players and fresh financial resources to the bourse more urgent than ever. Talks on drawing new sectors to the bourse have been promoted.
Former secretary general of bourse, Hossein Abdoh-Tabrizi recently visited Qom to convince clerics and religious authorities to invest some of the endowments through investment funds. Also, bourse officials have held meetings with Brigadier Hossein Daqiqi, who was in charge of armed forces’ investment, to have defense industries in the capital market, Persian daily ’Iran’ reported.
While Endowment Funds did not join the bourse, Balad-ul-Teyb Institute channeled some of the funds of theology schools and their students to the stock exchange following the launching of Qom Bourse and the acquisition of stocks by the manager of the institute, Mohammadreza Khamseh.
Consultations in recent years finally bore fruits. Along with traditional players such as Retirement Fund, investment companies of state-run banks, Social Security Organization of Iran, Mostazafan Foundation and Martyrs’ Foundation, new players gradually took part in bourse transactions.
At first, Sepah Retirement Fund entered the stock exchange by buying the shares of automaker Bahman Group. Later, Astan-e Qods-e Razavi increased its participation in the stock market.
Private banks which considered bourse as a proper venue for making profits, transferred part of their capitals to this sector in the form of investment companies.
Subsequently, companies such as Astan-e Qods-e Razavi, Foad Rey and the other charity and benevolent foundations also acquired shares through the stock market.
Offering the shares of mineral companies such as the retirement funds of steel and copper companies in the stock market in line with the policies of Article 44 of the Constitution (which seeks large-scale privatization), drew the interest of groups involved in the sector.
After studying major transactions in the bourse, a newcomer named Mehr-e Eqtesad-e Iranian Investment Company decided to invest in stocks. The company purchased five percent of the block shares of Mobarakeh Steel Company, 40 percent of Iralco Company and 42.5 percent of tractor manufacturing company in a tight competition with other bidders.
It also holds shares of Tous-Gostar (eight percent), Industrial Development Investment Company of Iran (11 percent), Sina Company (11 percent), Sadid Company (four percent), Mineral Products Company (two percent) and Zinc Mines Development Investment Company of Azarbaijan (one percent).
It is also eager to acquire the shares of companies such as Sadra from Bank Melli and Tidewater from Ports and Shipping Organization.
This indicates that the company has a definite plan to participate extensively and efficiently in the capital market.
A bourse official, who declined to give his name, opined that retirement funds play a major role in bourses of many countries such as Turkey and the US.
Presence of retirement funds in the Bourse Organization could have many advantages for the national economy, he said. Apart from increasing the capital bourse, profits from investment by retirement fund’s members in the bourse, can also help their families.

Indians Will Discuss Details of Rail Link
India has agreed to help Iran construct a crucial rail link as part of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP)’s Trans-Asian Railway (TAR) project.
“We will be cooperating with the Iranian authorities in developing the 600-km Chabahar port-Fahraj rail line that will provide India a multi-modal transport corridor to Russia via Iran,“ said India’s Railway Board Chairman K.C. Jena, Fars news agency wrote.
Jena, also the chairman of the Union of International Railway (UIC), was recently in Iran where he met Iran’s deputy minister for roads and transportation and president of Iran’s National Railway, Hassan Ziari.
“This week, a team of experts from Indian Railways will be visiting Iran to work out the details and other modalities of the project that would be executed under the ’build-operate-transfer’ (BOT) basis,“ said Jena.
The Railway Board chairman said the rail line was vital for the proposed North-South international corridor linking India, Iran, Azerbaijan and Russia. The corridor envisaged a direct link to St. Petersburg from Fahraj port through Amirabad in Iran and Astrakhan in Russia.
Jena said the next UIC meeting would be held in Seoul next month and by that time the three countries were likely to sign an agreement on the project.

Confab to Promote Petrochem Sector
The 8th International Petrochemical Conference will be held in the IRIB International Conference Center from May 17-18.
A group of high ranking officials and representatives of domestic and foreign companies will take part in the event. The conference aims to make participants familiar with Iranian petrochemical industry and investment opportunities in this sector.
At the two-day conference, future challenges of petrochemical industry, development of natural gas-based industry, investment trend, evaluation and reduction of dangers of aromatics products will be studied.
National Petrochemical Company has decided to increase production to over 24 million tons in the Iranian year to March 2009.
Meanwhile, Ardebil province is to hold two specialized exhibition in Azerbaijan Republic, head of provincial Commerce Department announced.
Yavar Safarpour noted that the exhibitions will showcase non-oil products from the province.
Recalling Ardebil’s specialized exhibition held in Baku last year, he noted that Iranian tradesmen had strong presence in the event.
Safarpour underlined that Iran and Azerbaijan Republic have over 380 km of common border, adding such exhibitions will prepare the ground for closer communications, economic transactions and trade relations.

Bank Profit Rates Revisited
Central Bank of Iran has tried to complement the government’s efforts to bring about positive changes in the banking system by putting forward a political-supervisory package.
From Page 1
Mousavian, who is among distinguished professors of Islamic banking, said, “In determining the banking profit rate the interests of three parties, namely depositors, the entities that are granted facilities and banks must be heeded. The point is that none of these parties should stand to lose when the profit rate is established.“
Meanwhile, another expert, Gholam Reza Mesbahi-Moqaddam emphasized that banking profit rate should be reduced without paying attention to the inflation rate.
“People who avoid risks deposit their capital in the banking system even under present circumstances. Therefore, they should pay the price for their attitude by being paid a profit rate less than the inflation rate. Nevertheless, people who are willing to take risks can both engage in production and invest in exchange contracts with banks and await an indefinite profit. Of course many experts believe that it contradicts religious tenets if a depositor suffers losses by depositing his or her money in the banking system,“ he noted.
Mesbahi-Moqaddam, a professor at Instructors’ Training University, underscored that the banking profit rate depends on the inflation rate because the CBI and the banking system as a whole are obliged to safeguard people’s deposits in terms of monetary value.
“The banking system should manage the deposits in such a manner that depositors do not suffer losses due to inflation and people’s capital does not depreciate in value. The crux of the mater is that everybody wants the banking profit rate to be lowered so that we reach a situation wherein Islamic contracts govern the economic system. But, under the present circumstances it is not possible to reduce the banking profit rate,“ he commented.
Morteza Tamaddon, another pundit holds that reducing banking profit rate is logical under present circumstances.
He said that since, on the average, less than 10 percent profit is charged on 90 percent of banking resources, it is rational to reduce the banking profit rate to 10 percent.
Tamaddon, who is a member of the Presiding Board of the Majlis Plan and Budget Commission, added, “Only 10 percent of banking deposits are long term deposits which are granted 16 percent to 17 percent profit rate. Therefore, banking profit rate should not increase for the sake of mere 10 percent of banking resources.“
Reza Abdollahi, head of Majlis Plan and Budget Commission, opined that the inflation rate growth plus the related banking fees must be considered in determining the banking profit rate.
“Bank charges amount to two or three percent of the banking profit rate and any other approach for computing the banking profit rate is a mistake,“ he added.
Furthermore, former managing director of Sepah Bank, Mahmoud Reza Khavari said, “People must have incentives to deposit in banks. The point is that the value of deposits should be at least maintained so that people do not lose their purchasing power due to an increase in the inflation.“
He noted, “If the banking profit rate is determined proportionate to or higher than the inflation rate, then people will have the necessary incentives to deposit their money in the banking system.“

Chabahar FZNeeds Airport
Chabahar Free Zone, in the southeastern province of Sistan-Baluchestan, is linked to Sarakhs, in Khorasan Razavi province, through the North-South Corridor and from there to Central Asia and China. Two jetties, Shahid Kalantari and Shahid Beheshti located in this zone, have breathed a new life into the region’s economy.
In a meeting with managing director of Chabahar Free Zone, head of Majlis National Security and Foreign Policy Commission, Alaeddin Boroujerdi said that Chabahar is considered an important link to the global market, reported ISNA.
Construction of Chabahar Free Zone International Airport should be put on top of the agenda of the government and Majlis as soon as possible, Boroujerdi urged. Qeshm International Airport can be considered a successful model by Chabahar officials, he said, adding that the commission would do its best to expedite the construction of the airport.

Trade Team
To Visit Bahrain
A delegation of Iranian businessmen and traders will visit Bahrain from May 3-6 at the invitation of Bahrain’s Chamber of Commerce and Industries.
According to MNA, the team, headed by vice chairman of Iran Chamber of Commerce, Industries and Mine, Ala Mirsadeqi, will also participate in the fifth joint council of the two countries businessmen.
Deputy Head of Bahrain Chamber of Commerce Ebrahim Mohammad Ali Zeynal said that the visit will have a great impact on expansion of cooperation between Iranian and Bahraini businesses.
Referring to the activities of members of the Iranian delegation, he said this provides suitable opportunity for Bahraini businessmen to get acquainted with the potentials of various sectors of the Iranian economy. The volume of trade transactions between Iran and Bahrain increased from 12.7 million Bahrain dinars in 2004 to 37.5 and 41 million Bahrain dinars in 2005 and 2006 respectively, the news agency quoted Zeynal as saying.

Foreign Reserves Improve
Iran’s foreign reserves, with the exception of gold, will increase by $3 billion and reach to its highest level in the year to March 2009, reported ISNA quoting the UK-based Economist magazine.
The magazine, in a report put Iran’s reserves, except gold, at $64.2 billion in the year to March 19. It anticipated that Iran’s reserves will rise to $67.2 billion by March 2009. “Given this rising trend, we will witness a falling trend as of March 2009.“
Iran’s foreign reserves except gold would fall to $65.7 billion, indicating a drop of $1.5 billion in the year to March 2010. Also, the figure would decline to $61.4 billion in the year to March 2011.
It will further drop to $55.2 billion by March 2012, witnessing a reduction of over $6 billion.
Most foreign exchange reserves are in euros while a small part is in yen or dollar.

S. Korea Buying Less Oil
South Korea National Oil Corporation has announced a drop of 25.7 percent in its oil imports from Iran in March.
According to a Press TV report, increasing oil prices led to a decrease of about 10 percent in South Korea’s oil imports compared to the same period a year ago, with the country’s refineries preferring to utilize their oil reserves rather than importing.
Based on the report, South Korea’s private sector oil reserves declined 10.7 percent to less than 65 million barrels in March.
The global oil price in March spiked to an average of $100 which was $50 to $60 higher than the same period last year.
South Korea’s oil imports from Saudi Arabia rose 1.3 percent to 22 million barrels while its imports from Iran and Oman declined by 25.7 percent and 28.6 percent respectively in March.

Food Exports
Commerce Minister Masoud Mirkazemi said the Persian Gulf Arab states are keen on importing food from Iran and that the country should make optimum use of such opportunity.

Cell Phone Expansion
Experts from International Telecommunication Union have drawn up tender documents for Iran’s third cell phone operator, said deputy minister of communication for training, research and international affairs, Kamal Mohammadpour.

Private Investments Urged in Oil Industry
To encourage private investment in oil industries, the government has devised a formula to supply crude oil to refineries.
According to IRNA, the government has adopted this important economic decision to remove a major obstacle to private sector participation in downstream oil industries (namely refineries and petrochemical plants).
The obstacle was the absence of a clear-cut pricing system for supplying crude oil, natural gas and their derivatives to refineries.
The president’s special representatives in February decided that the Oil Ministry should be allowed to calculate the price of crude oil and its derivatives which do not have a well-defined price using the formula ’Condensate Price = 57 percent Na + 17 percent diesel + 22.5 percent kerosene’.
The government underlined that the formula has been devised to encourage local and international private sectors to invest in Iran’s downstream oil industries. The formula will be applicable for the next ten years.

Gas Pipeline Talks Underway
Pakistani and Indian oil ministers Friday opened talks on the multi-billion dollar gas pipeline project from Iran to meet their fast growing energy needs, officials said.
Pakistan Minister for Petroleum and Natural Resources Khwaja Asif and the Indian Oil Minister Murli Deora will try to resolve the issue of transit fee, officials told IRNA.
On Thursday, both ministers said they are fully committed to the proposed Iran- Pakistan-India (IPI) gas pipeline.
IPI, also known as the ’Peace’ pipeline, is a proposed 2,775-kilometer project to deliver natural gas from Iran to Pakistan and India.
The project is expected to take three to five years to complete and was estimated in 2006 to cost US$7 billion.
The project is expected to greatly benefit both India and Pakistan which do not have sufficient natural gas to meet their rapidly increasing domestic demand for energy.
It is predicted that India will require 400 million cubic meters of gas per day by 2025, up from 90 million cubic meters per day in 2005. The talks had been delayed due to the political developments in Pakistan over the past year.
Deora, however, admitted there were still differences over the transit fees to be charged by Pakistan for Iranian gas to be transported through its territory to India.
He hoped that these would be addressed during Friday’s meeting and the project would be implemented according to established international practices.
Indian media has reported that New Delhi had offered a transit fee of 15 cents for every million British thermal units of gas, while Pakistan had sought a higher figure of about 60 cents per mBtu.
Officials were hopeful that the differences on this account would be narrowed during the upcoming talks as the pipeline is key to meeting the energy needs of both India and Pakistan.
The Pakistani minister said Thursday, “There is no pressure over the IPI and we will move forward on the project.“

Turkmen Gas Export Resumes
Turkmenistan has resumed gas export to Iran, says Managing Director of the National Iranian Gas Company Seyyed Reza Kasaeizadeh.
An Iranian delegate headed by Kasaeizadeh arrived in Turkmenistan on Thursday and met President Gurbanguly Berdymukhammedov.
The officials discussed the terms for the resumption of gas supplies to Iran which has been suspended since December 29.
President Berdymukhammedov expressed Turkmen’s readiness to cooperate with Iran on global gas trade and requested a floating price for exported gas from 2009.
Turkmen president also supported the idea of creating OPEC-type organization for gas exporting countries and expanding cooperation between the two countries in oil and gas fields, Fars news agency reported.
Based on an Iranian proposal, it was also decided that a bilateral group of experts meet to resolve the remaining issues and also study and suggest ways for the future cooperation between the two countries, Kasaeizadeh concluded.

Austrian Co. to Join LNG Project
Iranian Natural Gas Liquefaction Company managing director said here on Friday that an Austrian company will take part in Iran’s LNG project, MNA wrote.
“The Austrian company has agreed to support the technical and financial aspects of Iran’s LNG project,“ Ali Kheirandish said, adding that the company’s officials are due in Tehran around May 20 to sign the contract.
“Negotiations on financing some of the project’s costs from the Oil Stabilization Fund have begun and there are no worries about financing this project,“ he noted.
Given the current trend, the project should progress by 35 percent by March 2009, he explained, adding, “Based on schedule, the first phase of the Iran LNG project should become operational by December 2010.“
He concluded, “So far we have been in talks with three Asian and European companies for financing the project, but the final decision on these talks will rest with high ranking officials.“

Energy Subsidies Reach $84b
Subsidies to the tune of about $84.7 billion are being paid to the energy sector each year, observed deputy oil minister for planning affairs, Akbar Torkan.
He noted that a number of schemes are under study to make subsidies target oriented, adding, “Unfortunately a large amount of subsidy has been allocated to energy in the country, half of which pertain to natural gas,“ MNA reported.
The official added that 70 percent of subsidies are being paid to three wealthy groups of the society, noting that it is preferable to spend the sum on infrastructure development.
He put the country’s oil production at 4.19 million barrels per day, adding that domestic refineries use 1.6 million barrels and rest is exported.
Torkan commended the move taken by the Parliament on allocating three percent of crude revenues to implementing oil projects. This sum, which will total $2.7 billion, is sufficient for now, he was quoted as saying.

Oil Industry’s Domestic Purchase at $3.3m
The oil minister has announced that the industry purchased 32 billion rials ($3.3 million) worth of domestic goods in the year to March 19.
According to PIN, Gholamhossein Nozari described the recently concluded 13th International Oil, Gas and Petrochemical Exhibition as a good opportunity for domestic manufacturers noting that domestic companies sold goods worth 32 billion rials to the oil sector in the year to March.
Speaking at a ceremony to appreciate selected pavilions at the fair and journalists covering the event, he said domestic and foreign companies and consultants had an active presence in the 13th oil exhibition. The event, he noted, played an important role in improving and identifying domestic technical know-how.
Referring to the western-led negative propaganda against this year’s international event, the minister reiterated that the Iranian media outlets could help play a key role in improving the oil industry’s image abroad.
More than 1,000 companies from 26 countries and regions participated in this year exhibition which was held during April 16-20. Oil industry is pivotal for Iran which is the second largest oil exporter in the world.