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Iran Freight Transport Report Q3 2007Product Type: Market Research ReportPublished by: Business Monitor International Published: August 2007 Product Code: R302-1492 Description Iran’s shipping industry remains stuck in the slow lane. Ambitious fleet expansion plans are caughtbetween a squeeze on current oil exports as domestic consumption rises and Iran’s rather late start in developing its massive gas reserves. Last year, Iran tried to revive stalled privatisations by ordering the stock market flotation of 80% of several state companies. State-owned transport companies, including Iran Air and the Islamic Republic of Iran Shipping Lines (IRISL) shipping group, could be candidates for divestment. However, there have been few signs of progress since then, and looking at the shipping sector in particular, we do not see a big turn-around in prospect. Foreign and domestic investors are not convinced of the credibility of the privatisation proposals, and the former are likely to continue keeping their money far away from Iran because of political risk factors, including the possibility of further confrontation with the US over Tehran’s nuclear programme. Crude oil exports for shipping by tanker may be flat or fall in 2007, due to a shortfall of investment in the development of new fields and rising domestic energy demand. In our latest Iran Freight Transport Report, BMI concludes that shippingfreight carried will grow by an average of 4.5% per annum in the 2007-2011 forecast period, lagging behind the economy as a whole, which will expand by 4.8% on the same basis. Our forecast reflects the interplay of negative and positive factors. On the negative side, we do not think real privatisation and deregulation of the shipping industry is on the cards, despite recent announcements. Also weighing down on the forecast is the fact that the oil price boom is set to ease back over the next couple of years, and Iran may have difficulty in placing some of its heavier crudes in a tougher market. High political risk is another negative factor. There are, of course, positives as well. One is global demand for Iran’s natural gas and petrochemicals, much of which will need to be shipped by liquefied natural gas (LNG) tankers. New investment and export deals with China underline this potential. The general growth of the Iranian economy and trade will also provide support for shipping demand. As for other transport modes, road-haulage growth has lagged behind GDP in recent years, reflecting the poor quality of the highway network. Our forecast provides for a catching-up process, as overland trade with Iran’s immediate neighbours begins to grow. For 2007-2011, we predict annual average roadhaulage volume growth of 4.8%, on a par with GDP. Rail freight has lagged behind the general growth of the Iranian economy, but here we are less optimistic over the ‘catch-up’ potential. Despite much talk of building a new rail-based north-south transport corridor linking Iran to its regional neighbours, we take the view that there will not be significant increases in capacity during the forecast period. Rail-freight growth will average an unimpressive 2.4% per annum. Pipeline throughput will grow by 4.3%. On current plans, the big boost from the proposed pipeline to Pakistan and India will not make itself felt until after 2011, just at the end of our current forecast period. Airfreight will grow at an annual average of 4.1%, constrained by an ageing aircraft fleet. Iran sits at the bottom end of BMI’s ranking of the business environment for freight markets in the Middle East and Africa (MEA). Given the country’s abundance of natural resources, this is a reflection on the domestic political situation, regional uncertainties and lack of a track record in providing investment opportunities in the transport sector. The total value of transport and communications GDP will rise to US$33.5bn in nominal terms by 2011, representing 6.8% of Iran’s GDP. Projections based on employment figures compiled for the ILO in 1996 suggest that Iran’s transport and communications sector employed 3.29mn people, or 20.4% of the labour force, in 2005. Table of Contents
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