1. FRANKFURT 18 TH EURO FINANCE WEEK CHALLENGES FACING IRANIAN ECONOMY & FOREIGN INVESTOR Hossein Abdoh Tabrizi www.finance.ir NOVEMBER 18, 2015

2. CURRENT ECONOMICAL SITUATION  Stagflation situation was a heritage of the last Government Current government economical policies Negative oil shock Negative demand shock Credit crunch

3. INFLATION RATES

4. LAST TWO YEARS INFLATION

5. REAL GDP SHRINKAGE

6. REAL GDP GROWTH RATES

7. RECESSION  Recession in recent years dominated the economy mainly because of two reasons: 1. Negative Aggregate Demand Shock 2. Credit Crunch

8. NOMINAL BUDGET VS. REAL BUDGET

9. GENERAL GOVERNMENT NET LENDING/BORROWING

10. GENERAL GOVERNMENT GROSS DEBT

11. CREDIT CRUNCH

12. ASSET AND EQUITY OF IRANIAN BANKS

13. CREDIT CRUNCH

14. DOMESTIC CREDIT TO PRIVATE SECTOR

15. REAL INTEREST RATE

16. BANK SECTOR CLAIMS TO GDP (PERCENT)

17. INCOME PER CAPITA GROWTH RATE (PERCENT)

18. HOUSEHOLD SIZE

19. UNEMPLOYMENT RATES

20. ACTIVE LABOR

21. NUMBER OF WORKING FORCE IN FAMILIES

22. INVESTMENT OPPORTUNITIES IN DIFFERENT AREAS  Oil and Gas & Energy Saving Industries  Road and Urban Development  Mining Industry  Branding, Retail, and Tourist Industry  Services (Financial Services, IT)

23. FINANCING METHODS  Oil  Off-taking Products and Services  Restructuring (Privatization Organization)  Government Budget & Development Fund  Private Sector Capabilities

24. INVESTMENT RISKS  Lack of sound rules and compliance in banking sector  Exchange rate risk

25. INVESTMENT RISKS

26.  Lack of hedging instruments like futures market  No rating agency for the corporations and financial products

27. TWISTED SOCIOECONOMICS FEATURES  Numerous regulations  More serious taxing in the upcoming years  More Serious money laundry regulation

28. TIPS  Selecting a credible local partner.  Preparing decent business models.  Partially financing is a key factor for higher chances to have projects in Iran.  Real Estate recession and Real Estate Bubble is still on, so this should be included in making investment decision on real estate in Iran.

29. TIPS  Governors and mayors are extremely optimistic about all the projects in their region, but there must be a detailed evaluation of those business plans.  Overall banking situation is not good mainly because of dominant high interest rates and the bulk of toxic assets. So choosing the right bank to buy into or to work with is a difficult decision to make.  Government of Iran owes almost nothing to the world, and its credit standing is high and you can count on it, if working with the Government.

30. TIPS  Iran is not a member of WTO yet, and the Government discourages import of end goods and services. Setting up assembly line is a way around it. Tariffs are high, so it is recommended to produce inside the Country.  Learn about subsidy structures; businesses like electricity are not based on market economy.