Industry Spotlight: Mining
/By Ariane Gottlieb, Research Associate
A large state replete with natural resources, Iran is among the most mineral-rich countries in the world, holding approximately 7% of the Earth’s supply with 45 to 60 billion metric tons of 68 different types of minerals. Despite its natural advantages, however, Iran has failed to make the most of its mining sector. Mining employs just 620,000 people in the country and accounts for 0.6% to 1% of GDP. With 90% of Iran’s potential mines unsurveyed, some estimates put the industry’s potential worth at triple its current value. The deputy minister of Iran’s Ministry of Industry, Mines, and Trade, Mojtaba Khosrowtaj, has indicated that copper, lead, and rare earth elements could ultimately generate more revenue than the crude oil industry.
Sanctions have played a major role in impeding the sector. One reason has been the difficulty of importing new machinery. According to Mehdi Karbasian, the Deputy Industry Minister and director, “old and second-hand machineries are being used in many of the mines, some of which have been used in other countries for over 50 years.” This technological handicap creates a vicious cycle in which economic isolation and slow growth make it impossible to import new machinery, while the lack of up to date technology significantly impedes the sector’s growth.
With the lifting of western sanctions, the government is seeking $29 billion in investments and has tried to use legislation to draw in foreign businesses. In 2002, the Foreign Investment Promotion and Protection Act was passed to encourage the global market to invest in Iran, including its mining sector. While somewhat limited in its protections, the key components included i) granting foreigners full ownership rights, ii) opportunities for visas and the global movement of profits in foreign currency, iii) tax exemptions for foreigners, and iv) the government agreeing to compensate any investments that are nationalized or expropriated. Furthermore, the government is seeking a long-term strategy to strengthen and expand the industry, by building on expertise from foreign countries and revising the Iranian Mining Act, making the industry more transparent and reducing the risk of investment.
Beyond sanctions, another problem that has curbed growth in the mining sector in Iran has been a reliance on exporting raw minerals for profit, rather than processing them domestically and selling them at higher prices. For example, a combination of poor financial and mineral-processing infrastructure as well as higher world than domestic prices have pushed the private sector to export 80% of its iron ore. In an attempt to remedy this problem of over-exporting raw materials, the government plans to grant tax exemptions to the exportation of processed goods and to apply duties on the exportation of raw goods. This plan has not been without controversy, however. Critics of this policy have stated that the government cannot legally ban exports, and that export duties burden the industry without truly addressing the problem. Beyond tax incentives, new processing plants are also being opened to encourage domestic development raw materials.
Even as the government works to resolve these issues, the industry still confronts difficulties that mirror problems in the global mining sector, including low wages and difficult working conditions. Iran’s coal miners often earn meager pay for difficult and dangerous work. Working 12-hour days, miners earn less than $250 each month, barely above the minimum wage. Poor infrastructure makes accidents commonplace. Miners work with the constant fear of a tunnel collapse or gas explosion; sanctions make it impossible to import technology for improved safety and many managers are either unwilling or unable to invest in improved safety features. Sadly, these safety concerns are not unfounded; in May, an explosion of what was believed to be methane gas killed and injured dozens.
Below, more information can be found regarding Iran’s upcoming trade fair for mining construction materials, vehicles, and machinery.
Event:
13th International Trade Fair for Construction Machinery and Vehicles, Mining, Building Material Machines and Natural Stone Industry
Where:
Tehran Permanent Fairground
When:
November 4-7, 2017
Additional Details:
Disclaimer: By publishing information concerning these events, AIC is not recommending, endorsing, or marketing the events or any participation therein. Anyone interested in these events should undertake on their own to secure necessary information. Furthermore, any activity or involvement in such events must be in full compliance with all applicable laws, including U.S. economic sanctions and export control laws relating to the Islamic Republic of Iran.
