INVESTING IN IRAN (AFTER LIFTING OF SANCTIONS) BY INDIAN COMPANIES
In 21st century, industrial investment can flourish in countries that apply “rule of law”. Nations founded on principles of “rules of religion” are not preferred from the perspective of creation of assets. European nations in the 14th -15th centuries too were controlled by Christian/Jewish orthodoxy that made them quarrel with powers that be including the kings and rulers of that time. European nations realised that principle of governance has to be equality of rights for men and women of all religions, caste and creeds, freedom of expression, law and justice, travel, occupation and livelihood etc. They recast themselves in the 20th century or earlier.
India also adopted the similar/British model in its constitution in 1951. Pakistan did the opposite and has been repeatedly revising its constitution but it has not been able to segregate religion from the politics.
Before the prospects of investment in Iran are considered (after the likely conclusion of Iran-USA nuclear agreement), it will be worth pondering why Saudi Arabia (SA) has not been able to attract investment in industrial sector--
1 Saudi Arabia (SA) is one of the world’s richest nations with trillion of dollars/euros stashed in USA and EU, and has potential of generating additional revenues for the time that is untimed. But it lacks industrial development despite the fact that it possesses superior infra of roads, buildings, hospital, and schools. No one even goes there for higher education or medical treatment. Most of the workers are imported. Barring hydrocarbon and related companies, there is hardly any diversification in the industrial corridors.
2 SA had not been under any sanctions. Successive US administrations have been openly supporting/courting business with SA, including large scale supply of defence items. Why there are no textile, steel, autos, plastic, computer, pharma, food processing etc. industry? Their legal system is based upon Sharia law---the personal interpretation of the judge based upon Koranic/Sunnah/Hadith doctrines. Can such laws/interpretation be compatible with Anglo-US legal system?? Doubtful indeed!!
3 Iran too is tied to Islamic ideology like SA—though theologically it is called Shia-Islam. Shias and Sunnis are not treated on the same footing where the ruling elite are of opposite faith. Personal equality, dignity and freedom are denied to adherence of the contrarian beliefs. All decisions are to be taken by the Ayatollahs just as the King in SA. Foreigners and outsiders are unfamiliar with Iranian laws and the manner they conduct their legal proceedings. Even if Arbitrations are agreed as per rules/procedure of a particular society/Association, the law most likely will be that of Iran.
4 After lifting of sanctions, Iran will be as free as SA in managing its affairs with outside world. Except for fossil fuel sector, USA and West will not invest in Iran in any significant manner in other industries both due to “rules of religion” and for the threat of full scale discord between the Shias and Sunnis.
5 China is trading with Iran but not investing. It is common knowledge that Japanese companies invest with great caution and prudence. Japanese have not made any mega industrial investment in any of the countries wedded with conservative Islamic tradition. Indonesia, Malaysia and Turkey are very liberal in Islamic customs that follow democratic system and abide by rule of law. Japanese are in a big way in Indonesia and Malaysia but not in Middle-East. Whether Japan invests post sanctions should be watched.
6 India may go ahead at the “government level” for investing in project exports for refineries and ports or engineering supplies and projects. (ONGC and Essar steel (through STC) are already engaged in such transactions. A 900 km rail link from Chabahar port to Afghanistan is also under study by SAIL. Commerce Secretary’s Delegation to Iran in first week of April 2015 include representatives of all the above mentioned government companies. For Indian private companies risk profile may be too high to face the heat of unpredictability of Ayatollahs regime and in an unchartered territory riddled/infested with Taliban of Afghanistan.
7 Strange it may seem but true it is that Iran wants to deal with secular regimes in India and elsewhere while at home it professes its own fundamentalism. Thus BJP Government has a slight disadvantage in dealing with Iranian mind set. Was the official ban on import of Indian Basmati rice in 2014-15 was prompted with arrival of BJP government? It is a matter of conjecture and worth reflecting.
8 My views on trade will follow soon