631

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)

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.

03,0006,0009,00012,000

0 3,000 6,000 9,000 12,000

0-4

10-14

20-24

30-34

40-44

50-54

60-64

70-74

80+Japan (1970) Vietnam (2015)

The share of people in their 20s is large

(Age)

(Thousand)

632

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

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.

6.4 6.2 5.2 5.4 6.0

6.7

-6

-4

-2

0

2

4

6

8

10

12

2010 2011 2012 2013 2014 2015

Private consumption Government consumption

Gross fixed capital formation Inventory changes

Net export Errors

Real GDP growth rate

(Year-on-year, %)

(Year)

633

Figure II-4-2-3 Changes in exports by Vietnam (shares of the domestic sector and foreign sector)

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)

Note: Cellular phones and components are included in the survey items from 2010 onward.

Source: General Statistics Office of Vietnam and CEIC Database

0

20

40

60

80

100

120

140

160

180

Exports by the foreign sector

Exports by the domestic sector

Total export value

(Billion dollars)

(Year)

0

5

10

15

20

25

30

35 Telephone equipment and components

Needlework

Computers and components

Footwear

Lumber and wood products

(Billion dollars)

(Year)

634

(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

635

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.

636

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)

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).

Agriculture,

forestry and

fisheries

16% Mining and stone

quarrying

8%

Manufacturing

16%

Electricity and gas

4%Water supply

1%

Construction

6%

Wholesale, retail and car repair

services

9%

Transport and

warehousing

3%

Accommodation and

food services

4%

Information and

communications

1%

Financial services and

insurance

5%

Real estate

5%

Specialized, science and

technical services

1%

Administrative services

and support

0%

Political parties, government and

agencies

3%

Education and training

3%

Healthcare and social

work

1%

Art, leisure, etc.

1%

Other services

2%Housekeeping services

0%

Net indirect

taxes

12%

637

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.

638

Figure II-4-2-8 Population projections for India (comparison with China)

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)

Source: IMF WEO (April 2016)

0

2

4

6

8

10

12

14

16

181

98

0

19

83

19

86

19

89

19

92

19

95

19

98

20

01

20

04

20

07

20

10

20

13

20

16

20

19

20

22

20

25

20

28

20

31

20

34

20

37

20

40

20

43

20

46

20

49

China India

(100 million)

(Year)

India is expected to replace

China as the most populous

country by 2022

India

China (reference)

Japan (reference)

0

2

4

6

8

10

12

14

16

18

(%)

(Year)

639

(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.

640

Figure II-4-2-11 Distribution of Japanese business facilities in India

Source: Embassy of Japan in India and JETRO

641

Table II-4-2-12 Number of Japanese business facilities by industry

Industry Number of business

facilities

Industry Number of business

facilities

Financial services and

insurance

1,449 Manufacturing of

food, beverages,

cigarettes and feed

43

Wholesale and retail

trade (including trading

companies and

distributors)

575 Manufacturing of iron

and steel

32

Services 389 Manufacturing of

business-use

machinery

30

Manufacturing of

transport equipment

359 Textiles 18

Transport 280 Manufacturing of

ceramics, stone and

clay products

15

Other manufacturing

industries

279 Manufacturing of

general-use

machinery

15

Manufacturing of

electrical machinery

235 Accommodation and

food services

14

Chemicals 146 Rental and leasing 9

Information and

communications

94 Agriculture, forestry

and fishery

8

Construction 82 Manufacturing of

petroleum and coal

products

8

Manufacturing of metal

products

75 Real estate 7

Education, study

support, healthcare,

welfare and compound

services

69 Manufacturing of

lumber, wood

products, pulp, paper,

and paper products

5

Manufacturing of

information and

communication

electronics equipment,

electronic parts, devices

and electronic circuits

62 Electricity, gas, heat

supply and water and

sewage

2

Manufacturing of

production-use

machinery

61 Mining, stone

quarrying and gravel

quarrying

1

Manufacturing of

nonferrous metals

46 Total 4,417

Source: “List of Japanese Companies in India 2015” (published in February 2016) (Embassy of Japan

in India and JETRO)

642

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

Category Items Applicable

rate

Acquisition

of land

It was difficult to find land for which appropriation has been

completed.

22 %

Coordination concerning the property rights for the candidate land

was difficult.

17 %

Due to the lack of land registration, the company had to carry out

investigations.

9 %

Lawsuits filed by the land right holders 4 %

Infrastructure As existing power infrastructure was insufficient, additional

investment and development efforts were required (such as the

installation of an in-house power generator).

33 %

As existing water infrastructure was insufficient, additional

investment and development efforts were required (such as a

groundwater well).

15 %

Permission

and approval

It was difficult to obtain an operation permit. 22 %

It was difficult to obtain a construction permit. 20 %

It was difficult to obtain environmental clearance. 11 %

*Other

Tax systems

Complex tax systems that include many types of national and state taxes

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).

643

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.

644

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

645

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)

Source: United Nation Population Fund

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

Dependent population

Working-age population

(10,000)

646

Figure II-4-2-17 Changes in the working-age population in major oil-producing countries

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)

0

10 000

20 000

30 000

40 000

50 000

60 000

70 000

2015

2020

2025

2030

2035

2040

2045

2050

2055

2060

2065

2070

2075

2080

2085

2090

2095

2100

Afghanistan

Iran

Saudi Arabia

Turkey

Yemen

(1,000)

647

Figure II-4-2-19 Proportion of non-oil-derived revenue in the overall revenue in individual

countries (average from 2012 to 2014)

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)

Rank

Number of

automobiles

produced

Rank

Number of

automobiles

produced

Rank

Number of

automobiles

produced

Rank

Number of

automobiles

produced

Rank

Number of

automobiles

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

2010 2011 2012 2013 2014

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

0

10

20

30

40

50

60

Iran Qatar Yemen Algeria UAE Saudi

Arabia

Kuwait Oman Bahrain Iraq Libya

(%)

648

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)

Source: IMF WEO (April 2016)

Turkey

Iran

Yemen

Saudi Arabia

0

10

20

30

40

50

60

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

(%)

(Year)

649

Figure II-4-2-23 Changes in Iran’s fiscal balance

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.

-400000

-300000

-200000

-100000

0

100000

200000

300000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

(Billion Iranian Rial)

(Year)