07 February 2018
Dr.Seif's speech in Euromoney Conference as delivered by Dr.Aazizi on his behalf
Good Morning Ladies and Gentlemen,
At the outset I would like to thank the euromoney team for all their efforts to hold this remarkable conference.
In the aftermath of the implementation of the Joint Comprehensive Plan of Action, we are trying to plan and implement effective measures for reintegration of the Iranian economy into the global markets. During these years, Iran continuously fulfilled its international commitments under JCPOA. Moreover Iran has continued to take reform measures to align the financial and banking rules and regulations with international standards.
A review of the recent macroeconomic performance shows strong improvements in economic indicators. GDP growth indicates that the economy has improved substantially. Overall GDP growth rate was 4.5 percent, in the first half of the current fiscal year starting March 21st, 2017. Moreover, all sectors of the economy registered positive growth over the same course. The GDP growth for the previous year ending March 2017 was at phenomenal rate of 12.5 percent and was mostly due to the growth in the oil sector after implementation of JCPOA with its ensuing effect on the rise of oil production and exports. Iran’s economy generated 650’000 Jobs in the past fiscal year and continued to create more Jobs during current fiscal year. However, the growth projection for the current year will be mainly reliant on the non-oil sectors of the economy. Based on our projections which are corroborated by the latest IMF report, Iran's GDP growth for 2017 is estimated to be 4.2 percent. Furthermore, a single-digit inflation was attained after a quarter of a century and it is projected that inflation stays at the same zone by the end of the current fiscal year.
Iran’s foreign debt, compared to the size of GDP, foreign reserves, and exports is negligible. The strong balance of payment, coupled with the low level of foreign debt of the country, which is around 2% of GDP, is the source of confidence in future performance for attraction of external finance and investments, or absorbing any future BOP shock.
Despite improved economic growth in the real sector of the economy during the past years, Iranian economy is still facing high unemployment of around 12%. Therefore foreign investment attraction with employment generation is at the top of government’s agenda, as emphasized in the current Development Plan. Meanwhile, with a large domestic market on the one hand and access to regional markets on the other, there is a huge capacity on the demand side of the economy and hence higher growth potential for Iran’s economy.
Given the priority for the Job creation, the government, along with the Central Bank of Iran (CBI), has implemented strong reform measures for further facilitation of foreign investment.
We have concluded several finance agreements with our partners amounting to about 40 billion Euros last year. These medium and long term facilities have up to 14 years term and will be extended to Iran’s projects by banks in several countries including but not limited to South Korea, China, Denmark, Austria, Russia and Italy. Other finance agreements are also under negotiation and we hope that more countries will join this list in near future.
Providing long term finance to Iranian businesses and banks by various financial institutions and countries is another testimony of sustainability of Iran’s economy and helps establishing longer term relationship with our counterparts.
Regarding banking sector reform, at a high level, the reform plan components are;
• institutional reform including Bill of Banking law and Bill of Central Bank Law,
• enhancement of monetary policy plans and tools,
• medium term reforms of improving supervision system, recapitalization of banks,
• lowering NPLs,
• improving liquidity standards,
• toxic assets reform,
• resolution of shadow banking problem,
• promotion of governance structures, and
• requirements to apply International Financial Reporting Standards from 2016 which will gradually be implemented across industry.
Moreover, in order to prevent financial crimes and to facilitate the Iranian banks' reintegration into the global banking system, the Central Bank adopted measures to improve the Anti-Money Laundering and Combating Financing of Terrorism including revision of the guidelines and directives on Know Your Customer and compliance areas.
To enable Iranian banks to take up an appropriate role in the international markets, we are committed to adopt international regulations. Our banks are required to deny international banking services to customers who do not meet these standards. We are mindful of the risk exposure of our correspondents and counterparts and see their risk as ours. Let me put it this way; provision of correspondent banking relationship is a crucial ingredient of reintegration of Iranian banking system and we can’t afford to compromise it, hence security of our counterparts is our security.
In line with the national strategy to combat corruption, the AML, CFT and other compliance areas are being used as major components to fight financial crimes and promote transparency. These efforts starts at the highest possible level and drilled down to every corner of economic system. Therefore introduction of new laws and revision of existing laws and regulations, design and implementation of robust and resilient systems are underway and IMF, FATF, and ICRG are updated on regular basis. Meanwhile, Iran has benefited from technical assistance offered by european as well as non-european countries.
The measures taken by Iran were elaborated technically and in details in the last ICRG meeting held in January 2018. We are sure they will be acknowledged internationally. We have tried to use the best practice models in all situations. I am confident and have feedback from the member countries that Iran is on the right path. I hope Iran will be removed from FATF public statement in near future and our correspondent banking relationships are further developed.
To pave the way further, for the integration of Iranian banking system into the global system; we are determined to adopt the Basel III requirements. To this end, increasing banks' capital adequacy, better risk management and improvement of compliance functions are underway. With a view to international banking developments, the Iranian banks are taking appropriate measures to restructure with due attention to modern corporate governance rules. Nevertheless, we believe that concerns regarding Iranian banking system is mainly politically motivated and is far from the realities on the ground. Therefore, it is absolutely essential that direct interactions and talks are arranged, so that the global economic players could become more familiar with current developments of Iran's financial system and all sides can benefit from strengthened ties.
With the adoption of appropriate plans and facilitation of foreign investment, we hope to be able to enhance our relations with foreign counterparties, to better utilize the potentials of the Iranian economy. This is particularly emphasized in the current development plan. With the preparation of suitable grounds and given the capacities of Iran's economy, unique opportunities for the investment in oil and gas industries, transportation sector, automotive, tourism, and financial industries are available.
Allow me, please, to move to JCPOA. The JCPOA emerged from two-years tough negotiations. Although JCPOA is a huge achievement of the current times, but it will only survive if all parties, faithfully respect it and abide by their commitments.
In the aftermath of implementation of JCPOA, in the early 2016 we have started to interact with Central Banks, financial institutions and international regulatory bodies, including FATF which resulted in:
• Resumption of many banking relationships
• De-listing from “counter measure” list of FATF,
• Actively proceeding with our action plan and continuously updating FATF,
Iran is intent to continue this cooperation in the hope that it will be removed from the FATF public statement.
We do believe that Europe is capable to find the best path to protect their side of the deal. Iran repeatedly emphasizes that the deal has emerged through a win-win scenario, and it would continue if all of us can see our side of bargain materialized. Unfortunately Iran’s banking system is yet to see full benefits expressly promised under the deal.
If all of us are really eager to have a peaceful world, trade and economic ties are the best way to achieve this noble goal. To this end we, at the CBI, welcome all initiatives such as establishment of branches of banks, their representative offices and correspondent banking relationship necessary to serve import, export, investment and other transactions.
In the end, I emphasize, once more, that we are fully aware that we need to raise our standards and systems to provide more comfort to our partners and CBI regulates all banks to follow international standards. Iran on its part is ready to take all reasonable steps to mitigate the risk for willing counterparties to engage in mutually beneficial relations, transactions and investments. Iran once again is watching to see if politics helps or hinders business ties.
I am firmly of the belief that economic cooperation is an effective tool for genuine and long lasting prosperity and peace. Iran is a reliable partner for peace and trade.
Thank you for your attention.