Section 2 Vietnam, India and Iran 1. Vietnam (1) Expected economic growth Expectations are high for Vietnam’s economic growth for reasons such as: the country has the third- largest population in the ASEAN region and the population is expected to continue growing164; intra- regional trade is becoming more and more active due to the deepening of the ASEAN Economic Community; and Vietnam has signed the TPP. According to an estimate by the IMF,165 Vietnam will register economic growth of 6.3% in 2016 and 6.2% in 2017. Regarding Vietnam’s population mix by age, the share of people in their 20s is large, as it was in Japan during the period of high economic growth in the 1970s. In addition, per-capita nominal GDP is higher than 2,000 dollars166, a level above which the expansion of the consumption market is assumed to accelerate, so the middle class in Vietnam is expected to grow in the future (Figure II-4-2-1).
Figure II-4-2-1 Population mix by age in Vietnam (2015) and Japan (1970)
12,000 9,000 6,000 3,000 0 (Age) 80+ Japan (1970) Vietnam (2015) 70-74
60-64
50-54 The share of people in their 20s is large 40-44
30-34
20-24
10-14
0-4 0 3,000 6,000 9,000 12,000 (Thousand)
Source: "World Population Prospects: The 2015 Revision" (United Nations)
While the growth of ASEAN countries that achieved economic development early has been slowing, Vietnam’s GDP recorded a high growth rate of 6.7% in real terms in 2015. Among major factors behind the high growth are increases in production and exports due to foreign companies’ expansion into the country and the ensuing employment growth and income increase. As a result of economic stimulus
164 According to a medium-variant projection of the World Bank’s World Population Prospects: The 2015 Revision, Vietnam’s working-age population will peak in 2035 while its total population will peak in 2055. 165 An estimated published in April 2016. 166 According to the World Bank, Vietnam’s per-capita nominal GDP in 2014 was 2,052 dollars.
631 measures taken after the Lehman Shock, Vietnam experienced an expansion of the current account deficit (the ratio of the current account deficit to GDP was 11% in 2008) and high inflation (the inflation rate peaked at 23.1% in 2008). As the government implemented austerity measures in 2011, the growth rate slowed down to between 5% and 6% in 2012 and 2013. However, foreign companies 167 significantly expanded production lines of mobile phones in the same year, leading to an increase in exports. Employment growth caused by foreign companies’ increased investment and a rise in households’ purchasing power due to a decline in the inflation rate are considered to have contributed to the high growth since 2012 (Figures II-4-2-2, II-4-2-3 and II-4-2-4).168
Figure II-4-2-2 Changes in the growth rate of real GDP in Vietnam and contributions by demand components to the growth
(Year-on-year, %) 12 10 8 6.4 6.2 6.7 5.4 6.0 6 5.2 4 2 0 -2 -4 -6 2010 2011 2012 2013 2014 2015 (Year) Private consumption Government consumption Gross fixed capital formation Inventory changes Net export Errors Real GDP growth rate Note: The breakdown of 2015 has not been announced yet (as of the end of April 2016). Source: General Statistics Office of Vietnam and CEIC Database
167 Currently, Samsung Electronics and LG Electronics of the Republic of Korea, Nokia of Finland and Microsoft of the United States are operating factories manufacturing mobile phones and parts. In particular, Samsung Electronics is making significant contributions to Vietnam’s production and exports. 168 In Vietnam, spillover effects from foreign companies to domestic companies in Vietnam in terms of production are considered to be small because of the low local procurement rate. Growing as a production base of foreign companies brings substantial benefits in terms of employment, leading to growth in domestic demand, but developing Vietnam’s domestic industries is a major challenge. Therefore, there are hopes that foreign companies’ investments in small and medium-sized enterprises in upstream processes, as well as investments in large enterprises, will have spillover effects on the development of domestic industries.
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Figure II-4-2-3 Changes in exports by Vietnam (shares of the domestic sector and foreign sector)
(Billion dollars) 180
160 Exports by the foreign sector 140 Exports by the domestic sector 120 100 Total export value 80 60 40 20 0
(Year)
Note: Cellular phones and components are included in the survey items from 2010 onward. Source: General Statistics Office of Vietnam and CEIC Database
Figure II-4-2-4 Changes in the value of exports by Vietnam (top 5 items)
(Billion dollars)
35 Telephone equipment and components
30 Needlework Computers and components 25 Footwear 20 Lumber and wood products 15
10
5
0
(Year)
Note: Cellular phones and components are included in the survey items from 2010 onward. Source: General Statistics Office of Vietnam and CEIC Database
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(2) Vietnam’s growing attraction as an investment destination Until now, Vietnam has not concluded an FTA with the United States, Canada, Peru or Mexico, but the signing of the TPP means that it will conclude a trade agreement with these countries for the first time. The value of Vietnam’s exports to the TPP participant countries is approximately 62.3 billion dollars, or 41.5% of the country’s overall exports. Due to the elimination of tariffs and the introduction of a full-accumulation system concerning the rule of origin, Vietnam’s attraction as a base of production for the TPP region will grow.
Although Vietnam has not participated in the WTO Agreement on Government Procurement up until now, rules concerning government procurement will be introduced under the TPP. As a result, rules concerning government procurement will also be introduced into Vietnam. Thus, access to the infrastructure market and the government procurement market will improve, resulting in the expansion of opportunities for Japanese companies to enter the Vietnamese government procurement market. Moreover, under the TPP, it is prescribed that the restriction on foreign investment in some retailers, including convenience stores, should be drastically eased and the restriction on foreign investment in a broad range of other fields, including theaters, live music clubs and other Cool Japan-related facilities, tourism-related businesses such as travel agencies, and other businesses like advertising agencies should also be eased. As a result, Vietnam is also attractive as a new business destination for a variety of Japanese service industries.
(1) Enhancement of the economic relationship between Japan and Vietnam The bilateral relationship between Japan and Vietnam is very good, and the two countries recognize each other as an important partner. As for recent developments related to the two countries’ relationship, Prime Minister Nguyen Tan Dung visited Japan in July 2015 and agreed to continue to strengthen the two countries’ cooperative relationship under the Extensive Strategic Partnership. At that time, Prime Minister Shinzo Abe expressed Japan’s intention to support infrastructure development in terms of both quality and quantity under the Partnership for Quality Infrastructure, consider actively participating in urban development projects and provide cooperation in making further progress in the Vietnam Japan University program. Prime Minister Dung expressed a plan to improve the investment environment in order to promote investment by Japanese companies. In September 2015, General Secretary Nguyen Phu Trong of Vietnam’s Communist Party visited Japan as an official guest for the first time in six years. At the summit meeting, the Joint Vision Statement on Japan-Vietnam Relations, which forms the foundation of future development of the relationship, was announced.
In March 2016, Minister of Economy, Trade and Industry Motoo Hayashi visited Vietnam and held meetings with senior government officials of Vietnam, including former Deputy Prime Minister Nguyen Xuan Phuc (who took office as prime minister on April 7 of the same year), mainly in order to further promote economic cooperation between the two countries with an eye to the TPP. In addition, Minister Hayashi held the first meeting of the Joint Committee between Japan and Vietnam on Cooperation in Industry, Trade and Energy with the Ministry of Industry and Trade of Vietnam and agreed on new
634 cooperation activities in such fields as the textile industry, countermeasures against counterfeit products and energy, including nuclear power and highly efficient coal-fired thermal power169 (Figure II-4-2-5).
Figure II-4-2-5 First meeting of the Joint Committee between Japan and Vietnam on Cooperation in Industry, Trade and Energy
Source: METI
For Japan, it is important that SMEs and middle-sized enterprises manufacturing excellent products and the retail and distribution industry, including convenience stores, make the best use of the benefits of the TPP, such as the elimination of tariffs and the relaxation of the restriction in foreign investment in the retail and distribution sector. During this visit, Minister Hayashi attended the Vietnam Market Seminar, which was held in Ho Chi Minh City and was organized by JETRO. Minister Hayashi announced that special events called Japan Fairs were to be held in the autumn of this year at up to 200 Japanese convenience stores in Vietnam as the first round of support measures to be taken by the Council to Promote JETRO-Convenience Store Collaboration, which was established in January 2016, in order to increase sales of excellent, made-in-Japan goods on a trial basis. Minister Hayashi also announced the establishment of the Ho Chi Minh Overseas Business Expansion Council, whose goal is to strengthen collaboration between Japanese companies and support organizations including JETRO in order to uncover and solve issues faced by Japanese companies when expanding their businesses in Vietnam.
(4) Vietnam’s sustainable growth: cooperation in terms of human resources As described above, in order for Japan to achieve sustainable growth together with Vietnam, it will
169 Regarding the textile industry, an agreement was reached to establish a textile industry policy dialogue forum in order to support cooperation between the two countries’ textile industries to capture foreign markets by making the best use of the TPP’s benefits. In addition, regarding cooperation in fighting against counterfeit products, seminars have been held since FY2012 for the purpose of promoting expanding exports of Japanese companies’ legitimate products. In the seminars, Japanese companies owning intellectual property rights teach enforcement agencies responsible for detecting counterfeit products at national borders and in the market how to distinguish authentic products and fakes.
635 be beneficial to make active contributions to sectors where Vietnam needs support, such as the improvement of infrastructure and the development of supporting industries. Although Vietnam has set a national goal of becoming an industrial country at an early time, the share of agriculture, forestry and fisheries in real GDP in 2015 was 16%, the same as the share of the manufacturing industry, and this indicates that there is ample room for the sophistication of the industrial structure (Figure II-4-2-6).
Figure II-4-2-6 Shares of industries in Vietnam’s real GDP (2015) Art, leisure, etc. Other services Housekeeping services 1% 2% 0% Healthcare and social work 1% Education and training 3% Net indirect Agriculture, taxes forestry and Political parties, government and 12% fisheries agencies 16% Mining and stone 3% quarrying 8% Administrative services and support Real estate 0% 5% Manufacturing Specialized, science and 16% technical services 1% Financial services and insurance 5% Transport and Electricity and gas Construction Information and warehousing 4% 3% 6% Water supply communications 1% 1% Accommodation and food services Wholesale, retail and car repair 4% services 9% Source: General Statistics Office of Vietnam and CEIC Database
Personnel exchange is important as a foundation of the two countries’ sustainable growth. Currently, more than 30,000 students from Vietnam are studying in Japan170, while around 10,000 people from Vietnam have received training from the Association for Overseas Technical Scholarship171 in the past. Meanwhile, the Vietnam-Japan Institute of Technology provides education incorporating Japan’s manufacturing expertise. Given the high literacy rate in Vietnam, Japan can place high expectations on cooperation with Vietnam in terms of human resources (Table II-4-2-7).
170 The number of Vietnamese students studying in Japan (FY2015): 38,882 students Source: Results of an Annual Survey of International Students in Japan by the Japan Student Services Organization (JASSO) http://www.jasso.go.jp/about/statistics/intl_student_e/2015/index.html; external link 171 The Association for Overseas Technical Scholarship has now been reorganized as the Overseas Human Resources and Industry Development Association (HIDA).
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Table II-4-2-7 Literacy rate in Vietnam Year of survey Literacy rate Singapore 2013 96.5 Thailand 2010 96.4 Brunei 2011 96.1 Philippines 2008 95.4 China 2010 95.1 Vietnam 2009 93.5 Malaysia 2010 93.1 Indonesia 2011 92.8 Myanmar 2013 92.8 Cambodia 2009 73.9 Laos 2005 72.7 India 2011 69.3 Source: World Bank Unit: %
The Ministry of Economy, Trade and Industry established an Internet community called NIN2 Job Fair in Vietnam in July 2016 in order to enable Vietnamese students eager to work for Japanese companies to make successful achievements at Japanese companies. The ministry also plans to strengthen matching by holding job fairs to help Vietnamese students studying at Vietnamese universities to obtain jobs at Japanese companies. It is expected that the economic relationship between Japan and Vietnam will develop further through the promotion of such personnel exchange between the two countries.
2. India (1) The Indian market’s high potentials Currently, India has a population of around 1.26 billion people, the second largest in the world after China’s population, and is expected to replace China as the most populous country by 2022172 (Figure II-4-2-8). With the average age at around 25, the share of young people in the Indian population is large, while the wealthy class and the middle class are also growing. India’s share in global GDP (on a purchasing power parity basis) exceeded Japan’s share in 2008 (Figure II-4-2-9). In addition, India is rich in natural resources and ranks high in the global ranking of volumes of reserves of coal, bauxite and iron ore173.
172 According to the World Population Prospects (United Nations). 173 A large portion of India’s natural resources is produced in the state of Odisha.
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Figure II-4-2-8 Population projections for India (comparison with China) (100 million) 18 16 14 12 India is expected to replace China as the most populous 10 country by 2022 8 China India 6 4 2
0
1980 1986 1992 1998 2004 2010 2016 2022 1983 1989 1995 2001 2007 2013 2019 2025 2028 2031 2034 2037 2040 2043 2046 2049 (Year)
Note: Future population projections by United Nations. The future population is estimated at five-year intervals. The projections are classified into long-range, moderate-range, and short-range projections. Here, the moderate-range projection is displayed. Source: “World Population Prospects: The 2015 Revision" (United Nations)
Figure II-4-2-9 Changes in India’s share in global GDP (on a purchasing power parity basis) (%)
18 China (reference) 16
14
12
10
8 India
6 Japan (reference) 4
2
0
(Year)
Source: IMF WEO (April 2016)
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(2) Promoting Japanese companies’ expansion into India The number of companies operating in India has been increasing year after year. As of February 2016, a total of 4,417 business facilities owned by 1,229 Japanese companies were operating there, and the number of business facilities in North and Northeast India was particularly large, at 1,490174 (Figures II-4-2-10 and II-4-2-11). Of the 4,417 business facilities, the financial services and insurance industry had the largest share, 1,449 facilities, followed by the wholesale and retail trade industry (575 facilities) and the services industry (398 facilities) (Table II-4-2-12).
Figure II-4-2-10 Changes in the number of Japanese companies operating in India
Source: “List of Japanese Companies in India 2015 ” (published in February 2016) (Embassy of Japan in India and JETRO)
174 Cited from the 2015 List of Japanese Business Establishments in India (published in February 2016), which was prepared jointly by the Japanese embassy in India and JETRO. The number of companies represents the total sum of (i) the number of representative offices, branches, etc. of Japanese companies (companies not incorporated in India), (ii) the number of Japanese-affiliated companies incorporated in India (fully owned subsidiaries and headquarters of joint ventures) and (iii) the number of companies started in India by Japanese nationals.
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Figure II-4-2-11 Distribution of Japanese business facilities in India
Source: Embassy of Japan in India and JETRO
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Table II-4-2-12 Number of Japanese business facilities by industry Industry Number of business Industry Number of business facilities facilities Financial services and 1,449 Manufacturing of 43 insurance food, beverages, cigarettes and feed Wholesale and retail 575 Manufacturing of iron 32 trade (including trading and steel companies and distributors) Services 389 Manufacturing of 30 business-use machinery Manufacturing of 359 Textiles 18 transport equipment Transport 280 Manufacturing of 15 ceramics, stone and clay products Other manufacturing 279 Manufacturing of 15 industries general-use machinery Manufacturing of 235 Accommodation and 14 electrical machinery food services Chemicals 146 Rental and leasing 9 Information and 94 Agriculture, forestry 8 communications and fishery Construction 82 Manufacturing of 8 petroleum and coal products Manufacturing of metal 75 Real estate 7 products Education, study 69 Manufacturing of 5 support, healthcare, lumber, wood welfare and compound products, pulp, paper, services and paper products Manufacturing of 62 Electricity, gas, heat 2 information and supply and water and communication sewage electronics equipment, electronic parts, devices and electronic circuits Manufacturing of 61 Mining, stone 1 production-use quarrying and gravel machinery quarrying Manufacturing of 46 Total 4,417 nonferrous metals Source: “List of Japanese Companies in India 2015” (published in February 2016) (Embassy of Japan in India and JETRO)
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According to a questionnaire survey175 conducted with Japanese companies already operating in India by the Ministry of Economy, Trade and Industry with respect to challenges encountered when expanding into India and systems to which they want improvements to be made, the following four items in particular were cited: (i) difficulty of acquiring land, (ii) insufficient infrastructure, (iii) cumbersome procedures for permission and approval, and (iv) complex tax systems (Table II-4-2-13).
Table II-4-2-13 Challenges encountered by Japanese companies when expanding into India Applicable Category Items rate Acquisition It was difficult to find land for which appropriation has been 22 % of land completed. Coordination concerning the property rights for the candidate land 17 % was difficult. Due to the lack of land registration, the company had to carry out 9 % investigations. Lawsuits filed by the land right holders 4 % Infrastructure As existing power infrastructure was insufficient, additional 33 % investment and development efforts were required (such as the installation of an in-house power generator). As existing water infrastructure was insufficient, additional 15 % investment and development efforts were required (such as a groundwater well). Permission It was difficult to obtain an operation permit. 22 % and approval It was difficult to obtain a construction permit. 20 % It was difficult to obtain environmental clearance. 11 % *Other Complex tax systems that include many types of national and state taxes Tax systems Source: “Report on the Program to Explore Emerging Country Markets (program to support partner countries’ development of industrial policies and institutional systems)” (a survey commissioned by METI) (Nomura Research Institute)
In order to resolve these problems, it was agreed, under the Action Agenda for the India-Japan Investment and Trade Promotion and Indo-Pacific Economic Integration, which was signed by Japan and India in April 2015, to develop Japan Industrial Townships (JIT) that provide investment incentives
175 A questionnaire survey conducted with companies under the FY2014 program to explore emerging country markets of the Ministry of Economy, Trade and Industry (program to support partner countries’ development of industrial policies and institutional systems (India: survey concerning promotion of investment in and trade with India)). In the survey, the respondents were asked to check the items corresponding to the challenges faced by them, with multiple replies permitted. For the details, refers to the survey report http://www.meti.go.jp/meti_lib/report/2015fy/000212.pdf).
642 comparative to those offered by existing frameworks such as Special Economic Zones (SEZ) and National Investment and Manufacturing Zones (NIMZ) and which are installed with the highest level of infrastructure in the world. Twelve candidate sites for JIT are set to be developed (Figure II-4-2-14). The Ministry of Economy, Trade and Industry has been holding continuous consultations with the Ministry of Commerce and Industry of India and the governments of priority Indian states about incentive measures that facilitate investment by Japanese companies (measures to ensure stable supply of electricity, preferential tax measures, unification of states’ permission and approval authorities, development of supporting infrastructure making effective use of Japanese ODA loans, etc.). While the progress in construction varies from JIT to JIT, there were 46 companies (of which 43 were in operation and three were under constriction) located in an industrial zone constructed in the state of Rajasthan exclusively for Japanese companies as of January 2016, with all lots available for sale sold out.
Figure II-4-2-14 Twelve candidate sites for JIT
In addition, in light of the strong powers held by state governments with respect to the development of the business environment, the Ministry of Economy, Trade and Industry is strengthening cooperation with strategic states where Japanese companies are clustered 176 . Moreover, the Japan Chamber of
176 The Ministry of Economy, Trade and Industry has established policy dialogue frameworks with the Indian states of Andhra Pradesh, Gujarat, Karnataka, Rajasthan, Tamil Nadu, Maharashtra and Madhya Pradesh to hold discussions on promotion of Japanese companies’ investments and expansion into India and the improvement of the business environment.
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Commerce and Industry in India has been continuing negotiations so that Japanese companies operating in India can smoothly conduct business. For example, it has been submitting a proposal paper to the Indian government annually. If the business environment steadily improves in response to calls for improvement from Japan, more and more Japanese companies are expected to expand into the Indian market.
(2) A new era in the Japan-India relationship In December 2015, Prime Minister Shinzo Abe visited India and held the Japan-India Summit with Prime Minister Narendra Modi. Prime Minister Abe hailed the dawn of a new era in the Japan-India relationship by stating that a “strong India is good for Japan and a strong Japan is good for India, and through the solid Japan-India relationship, Japan hopes to drive the peace and prosperity of the Indo- Pacific region as well as the international community.” Prime Minister Modi stated that there is no partner who has played a more decisive role in India’s economic reforms than Japan has done and that “No friend will matter more in realizing India’s economic dreams than Japan.” Thus, this became a summit meeting emblematic of the increasingly close and strong relationship between Japan and India (Figure II-4-2-15).
Figure II-4-2-15 Prime Minister Narendra Modi welcoming Prime Minister Shinzo Abe
Source: Website of the Ministry of Foreign Affairs (the photograph was provided by the Cabinet Public Relations Office)
Prime Ministers Abe and Modi agreed on the following matters and expressed their intentions to further strengthen the economic relationship between Japan and India: establishment of the Japan-India Make-in-India Special Finance Facility, which is intended to provide broad support for Japanese companies’ direct investment and business activities in India and infrastructure development; promotion of the development of supporting infrastructure (roads, electric power and water facilities, etc.) in areas around Japan Industrial Townships; the adoption of the Japanese Shinkansen system of high-speed
644 railways for India’s high-speed railway project; promotion of railway cooperation in India and expansion of business opportunities for Japanese companies; cooperation for subway construction; cooperation in the field of civilian-use nuclear power; cooperation in the fields of highly efficient coal-fired thermal power and renewable energy; establishment of the Japan-India IoT Investment Initiative, which is intended to promote Indian investment in I-T-related fields in Japan; and student exchange, IT training and short-term exchange programs involving young Indian people.
3．Iran (1) Iran’s particularly high potential compared with other resource-producing countries Iran has particularly large room for economic growth and has high potential as a market among resource-producing countries. First, Iran has a particularly large population in the Middle East and is the 18th most populous country in the world. Compared with other oil-producing countries as well, Iran has a large population (Figure II-4-2-16). Until 2035, Iran is projected to have one of the largest working- age populations among major oil-producing countries. Although the working-age population in Iran is set to decline thereafter, it is projected to remain large compared with working age populations in other oil-producing countries (Figure II-4-2-17).
Figure II-4-2-16 Comparison of the populations of Middle Eastern countries (2015)
(10,000)
9000 8000 7000 Dependent population 6000 5000 Working-age population 4000 3000 2000 1000 0
Source: United Nation Population Fund
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Figure II-4-2-17 Changes in the working-age population in major oil-producing countries
(1,000)
70 000
60 000 Afghanistan
50 000 Iran 40 000 Saudi Arabia 30 000 Turkey 20 000
10 000 Yemen
0
2040 2065 2090 2015 2020 2025 2030 2035 2045 2050 2055 2060 2070 2075 2080 2085 2095 2100
Source: United Nations Population Division
Iran, which has rich reserves of resources, is No. 1 in the world in terms of proven reserves of natural gas (global share of 18%) and No. 4 in the world in terms of proven reserves of crude oil (global share of 9%) (Figure II-4-2-18). Most resource-rich countries are highly dependent on resources and have failed to develop non-resource industries. However, in Iran’s case, oil-derived revenue accounts for only around 40% of its overall revenue, providing a contrast to Bahrain, where energy-derived revenue makes up some 80% of its overall revenue (Figure II-4-2-19). As for Iran’s non-resource industries, the automobile industry in particular is strong. In 2010, before the economic sanctions were imposed on Iran, automobile production volume in Iran was higher than the volume in Russia and the United Kingdom (Table II-4-2-20).
Figure II-4-2-18 Comparison of reserves of resources in Iran and other countries
Source: “Statistical Review of World Energy 2015” (BP)
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Figure II-4-2-19 Proportion of non-oil-derived revenue in the overall revenue in individual countries (average from 2012 to 2014)
(%) 60
50
40
30
20
10
0 Iran Qatar Yemen Algeria UAE Saudi Kuwait Oman Bahrain Iraq Libya Arabia
Source: IMF Middle East and Central Asia Regional Economic Outlook (2015)
Table II-4-2-20 Ranking of the production volume of automobiles (unit: 10,000)
2010 2011 2012 2013 2014 Number of Number of Number of Number of Number of Rank automobiles Rank automobiles Rank automobiles Rank automobiles Rank automobiles produced produced produced produced produced Iran 13 160 13 164 19 92 20 74 18 113 Russia 14 141 12 199 11 223 11 218 11 189 UK 15 139 14 146 14 158 14 160 14 160 Source: International Organization of Motor Vehicle Manufacturers (OICA)
Under the sanctions, production volume declined, but Iran, with its rich reserves of natural resources, is strong in energy sectors other than crude oil. Therefore, amid expectations of slowdown in the economic growth of other resource-producing countries, Iran may achieve high economic growth due to the lifting of the sanctions, according to a certain estimate.177
(2) Challenges faced by Iran The recent economic situation of Iran has remained uncertain recently, just after the easing of the sanctions. Crude oil production volume has declined steeply since 2012, when Europe suspended crude oil imports from Iran as part of the sanctions, and oil revenue dropped by approximately 24 billion dollars in 2015 compared with fiscal 2014 because of drops in natural resource prices (Figure II-4-2-
177 World Economic Outlook (IMF), October 2015
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21). Iran has a low ratio of revenue to GDP compared with other oil-producing countries, and as Iran’s fiscal balance is deteriorating rapidly, fiscal consolidation is an urgent task (Figure II-4-2-22 and II-4- 2-23).
Figure II-4-2-21 Iran’s crude oil production volume
Source: “Statistical Review of World Energy 2015” (BP)
Figure II-4-2-22 Revenue of major oil-producing countries (ratio to GDP) (%) 60
50
40 Turkey 30 Saudi Arabia 20 Yemen Iran 10
0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 (Year)
Source: IMF WEO (April 2016)
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Figure II-4-2-23 Changes in Iran’s fiscal balance
(Billion Iranian Rial) 300000
200000
100000
0
-100000
-200000
-300000
-400000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 (Year)
Source: IMF WEO (April 2016)
(3) Status of other countries’ entry into the Iranian market Regarding Iran, for the moment, there are factors of uncertainty, such as the deterioration of the fiscal balance. However, Iran still remains an attractive investment destination, and it has already concluded investment treaties with 52 countries in addition to Japan, including China, the Republic of Korea and Europe. International oil development companies and Japanese companies are also strongly interested in Iran’s oil and natural gas resource potential. In November 2015, the Iranian government announced the outline of a new contract method concerning oil and natural gas projects. Both domestic and foreign companies are paying attention to detailed information concerning the contract method that will be revealed in the future.
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