BMI's Executive Summary

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Iran's shipping industry remains stuck in the slow lane. Ambitious fleet expansion plans are still caught between a squeeze on current oil exports as domestic consumption rises and Iran's rather late start in developing its massive gas reserves. In 2006, 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, more than a year on, there have been few signs of progress, and looking at the shipping sector in particular, we do not see the prospect of a big turn-around.. 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. The US and European governments have been tightening their stance on trade sanctions. 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 shipping-freight 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. 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 ofnatural 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.

Contents

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Chapter 1 - Executive Summary

Chapter 2 - SWOT Analysis

Pipeline To Pakistan And India

Gas Pipeline to Pakistan & India SWOT

Iran Economic SWOT

Iran Business Environment SWOT

Chapter 3 - Business Environment Overview

Regional Overview

Country Overview

Table: Africa & Middle East (AME) Countries Freight Business Environment Ranking

Business Environment Ranking

Politics – Long-Term Risk

Economics – Long-Term Risk

Freight Transport Growth

Transport Infrastructure Growth

Regulatory Environment

Competitive Environment

Transport Intensity

Political Risk Summary

Economic Risk Summary

Business Environment Risk Summary

Legal Issues

Red Tape

Chapter 4 - Industry Trends And Developments

Road

Rail

Air

Sea

Pipelines

Chapter 5 - Industry Forecast Scenario

Table: Macroeconomic Activity

Chapter 6 - Country Snapshot: Iran Demographic Data

Section 1: Population

Table: Demographic Indicators (2005)

Table: Rural/Urban Breakdown

Section 2: Education And Healthcare

Table: Education As % Of Age Group

Table: Healthcare: Vital Statistics

Table: Healthcare: Expenditure

Section 3: Labour Market And Spending Power

Table: Consumption And Stratification

Table: Wages Per Annum

Chapter 7 - Transport Outlook

Freight Tonnage (Domestic And International)

Table: Iran Freight Transport Industry Forecast

Chapter 8 - Trade Environment

Overview

Tariff Regime

Key Trading Partners

Major Imports

Foreign Trade Regime

Tax Regime

Table: Total Value Of Imports (US$mn)

Table: Total Value Of Exports (US$mn)

Table: Top Export Destinations (US$mn)

Table: Export Trade, % y-o-y

Table: Top Import Sources (US$mn)

Table: Import Trade, % y-o-y

Chapter 9 - Market Overview

Multimodal

Infrastructure

Competitive Landscape: Multimodal

Road

Infrastructure

Competitive Landscape: Road

Rail

Infrastructure

Competitive Landscape: Rail

Air

Infrastructure

Competitive Landscape: Aviation

Company Profiles

Water

Infrastructure

Competitive Landscape: Maritime

Company Profiles

Pipelines

Competitive Landscape: Pipelines

Chapter 10 - BMI Forecast Modelling

How We Generate Our Industry Forecasts

Transport Industry

Sources

Chapter 11 - Appendix: Regional Demographic Data

The Long View: Data Over The Economic Cycle (2000-2007)

Population

Household Spending Per Capita, US$

Private Consumption Per Capita, US$ PPP

Market Size, GDP, US$bn

Competitive Landscape for Middle East & Africa Freight Transport Reports: Sample of Companies Ranked

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Analysis of latest projects across the freight transport sector – road, rail, air, sea, logistics – including market overview which provides an outline of the key elements driving development. SWOT analysis of the state’s business environment, transport sector, politics and economics, which carefully evaluates the short- and medium-term issues facing the industry.

Network of Middle Eastern & African Freight Transport Sources

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BMI's Middle Eastern & African Freight Transport Reports are based on an extensive network of multilateral organisations, government departments, freight transport industry associations, chambers of commerce and company reports. Information sources include: