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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)
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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)
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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
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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.
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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%
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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.
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)
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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
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)
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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
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).
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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
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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)