ISLAMIC REPUBLIC OF IRAN

Speech by

H. E. Dr. Kamal Kharrazi

"Minister of Foreign Affairs of the Islamic Republic of Iran on the Official Visit to the United Kingdom"

January 11, 2000

Asia House

In the name of God

Mr. Chairman, His Excellency Ambassador

Ladies and Gentlemen,

I am pleased to have this opportunity to address this distinguished gathering at Asia House. I am confident that such forums, in which ideas and information are exchanged, will facilitate our economic cooperation between our two countries.

The 20^th century, with all its ups and downs is behind us, and we have entered a new millennium, a millennium which holds much promise for all members of the human race.

The world has undergone dramatic change over the past century. Thanks to advances in telecommunications technology, time and space have lost their significance. This has resulted in the world becoming an interconnected entity. In such a world, peaceful coexistence and stable cooperation are indispensable.

Inevitably, collective solutions need to be found to various international issues and problems. This is necessitated by the current process of globalization and economic interdependency together with the increasing role of international organizations and economic agencies.

Aside from the high hopes for the 21^st century, there are many challenges as well.

• How can the world come up with a new economic order that will accommodate the interests of all countries?

• With the economic convergence accelerating, how can urgent solutions be found to the many economic problems experienced by developing countries?

• How can the crises that erupt because of economic globalization, be adequately managed, to control the negative impact of such developments?
• How can the developing countries be given a share in the process of globalization and economic convergence.

Thus, all nations must come together to build a responsible world, in which peace and justice are enjoyed by all. Cultural interaction plays a major role in such a noble enterprise. That is why the proposal by the Islamic Republic of Iran for a "dialogue among civilizations" was widely received last year. The UN has endorsed the idea and designated the year 2001 as the year of Dialogue Among Civilizations.

This idea is rooted in the principles of the Islamic Republic of Iran's foreign policy. Some of these principles are as follows:

• The policy of détente and the promotion of relations with other countries, especially our neighbours.

• The promotion of regional cooperation and playing a constructive part in international economic relations through active participation in international trade and financial organizations, such as IMF, World Bank and WTO.

• Contributing to world peace by taking part in efforts aimed at finding solutions to regional and international issues - such as the crises in Palestine, Afghanistan and Tajikistan.

• Supporting underdeveloped countries in a bid to establish global justice.

• Expressing our opposition to discriminatory policies in international economic relations as well as to the imposition of extraterritorial law.

It needs to be emphasized that there is complete consensus at different levels of decision making in Iran on the above principles and decisions relating to foreign policy.

Ladies and Gentlemen,

The economic trend in my country over the past two decades can be divided into three distinct periods:

1. The first period concerns the time immediately after the victory of the Revolution and our defense against an invading neighbour. In this period, the Import Substitution policy was followed, mainly due to the nature of the Revolution and the requirements of the imposed war.
2. The second period concerns the time when much effort was put into the reconstruction of damages left by the war. During this period, a combination of Import Substitution and Export Oriented policies based on the countrys economic advantages was carried out.

Embarking upon two Five-Year Economic Plans, and mostly relying on national cooperation, with little foreign assistance successfully implemented the program of reconstruction. Despite the magnitude of devastation caused by the war, and the high rate of population growth (3.6) after the Revolution, the country was able to adequately weather this period. Iran was able to extensively invest in higher education to increase the scientific and technological capacity of the nation. So much so, that according to a recent UN study, the Islamic Republic of Irans Human Development Index has increased from 64.1% to 75.7% between1988 and 1998.

In this period, domestic production capacity grew to such an extent that many of the goods and services which were previously imported from abroad were now produced locally.

3. The third period started with the election of President Khatami. Benefiting from the experience gained during the first two development plans, and in the light of the global economic developments, the Economic Rationalization Program and the Third Development Plan for 2000-2005 were produced.

The main points of the third period are as follows:

Firstly, economic liberalization focusing on:

1. Reducing the size of government and increasing efficiency,
2. Expediting the privatization process,
3. Increasing the efficiency of state-run companies by the gradual phasing out of the existing monopolies, and
4. Reducing government intervention in economic activities.

Secondly, overcoming the problem of unemployment and recession by:

1. Inviting foreign investment, and
2. Maximizing the share of the private sector's investment in domestic economic activities.

And finally, a new trend in our economic relations, focusing on:

1. Increased use of international financial markets,
2. Encouraging foreign investment in the form of partnership, FDI in the mainland or investment in the free-trade zones. In this connection, given the political stability in Iran and positive economic developments, it would be appropriate for Iran's trade partners within EU, especially the United Kingdom, to review their policy on political and insurance risks in trading with Iran.

The Government of the Islamic Republic of Iran, under the Law for the Attraction and Protection of Foreign Investment, has provided favorable conditions for foreign investment in Iran. Under this Act, foreign investors may bring in their cash, machinery, technology, etc. as capital to invest in the industrial, mining, agricultural, tourism and transportation projects of the country and take advantage of all the privileges envisaged in the Act. Furthermore, under the rules governing free trade and special industrial zones, vast potentials have been made available which include the following:

• Opening branches of foreign banks and insurance companies

• 100% foreign ownership

• Free transaction of foreign currencies based on the market exchange rate

• Tax exemptions, and

• Inexpensive energy and affordable manpower.

Ladies and Gentlemen,

The relations between Iran and Britain have witnessed many ups and downs in the past century. Having learned from our past, we are entering the new century hoping to explore new ways and means for a more amicable and sincere relationship based on mutual respect and the interests of our two nations.

Our two countries enjoy outstanding positions as two major actors in the international arena. Iran is located at the heart of two world energy centers, the Persian Gulf and the Caspian Sea. It is endowed with respectively 10% and 14% of the worlds oil and gas reserves, and has the fifth largest mineral deposits of the world. Among the other advantages of Iran are: skilled and specialized manpower, a vast transportation and transit network, and access to the Persian Gulf and the Caspian Sea with a market of 300 million people. This provides ample grounds for bilateral and regional cooperation in various fields which should realized as much as possible to the benefit of our two nations.

It is essential to point out that we are entering a new chapter in our bilateral relations, for which the confidence-building stage is nearing completion. Constructive engagement between our two nations, based on mutual respect, will lead to comprehensive expansion of ties between Iran and the United Kingdom. Some areas of economic cooperation are as follows:

• Energy is among the most important sectors of Iran's economy. Both countries have been consistently engaged in extensive cooperation in this field. Thanks to their awareness of political developments in Iran after the Revolution, British companies have maintained their interest in having a share in this sector, albeit it with a degree of reservation and concern. Considerations relating to the amalgamation of large oil companies in the world may be held accountable for the delay in the commencement of such cooperation. Development of Iran's oil reserves in the Caspian sea and the Persian Gulf areas, especially gas in South Pars, aimed at meeting domestic requirements as well as exporting to world markets, has created many opportunities for cooperation. We are witnessing fierce competition in this area by important international oil companies.

• In the area of investment, I hope that the signing of the Agreement on Promotion and Reciprocal Protection of Investment between our two countries, which is going through its final stages, will prepare the ground for the increase of direct British investment in Iran. Implementation of high-priority programs in Iran financed by long-term soft loans granted by friendly countries are among the symbols of cooperation in economic relations. Credits given annually by the United Kingdom and Europe to various other countries in the form of ODA can and should be reviewed in relation to Iran.

• On the issue of trade relations, we believe that Iran and Britain should have a balanced relation, sustainable only when in the mutual interest of both nations. While Iran's access to UK's export credits is still faced with some obstacles, compared with some of the other EU countries, it is expected that the private sector in the United Kingdom, in this respect, should take more serious steps to facilitate its increased presence on the Iranian market as well as the regional market through Iran.

In conclusion, I would like to emphasize that as the most stable country in the region with a democracy based on the will of its people, a young, educated and hard working population, the Islamic Republic of Iran pursues policies which are geared to enhance peace, security and development, whilst securing its share in regional and world politics and economy.

I thank you once again for the opportunity to address this gathering.

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