In an article according to the National Development Fund of Iran reports’, Donyaye Eghtesad has dedicated its editorial to a note from Mehdi Ghazanfari, the chairman of the board of National Development Fund; we read in this editorial:
I have read somewhere, “to put into account the producing of 2.6 million barrels of oil daily, and considering the fact that oil reserves are 208 billion and 600 million barrels, Iran will have oil for the next 220 years.”
Before checking the validity of this statement, this fact brings joy and hope to any Iranian. But if we had to know that there are no guarantees for the use of fossil fuels in the centuries ahead, there might be some ‘buts’ and ‘ifs’ to that statement. I have read somewhere else that said, “It is probable that at the very least, about 11 to 14 trillion of dollars of fossil fuel capital will be lost. And also, we have seen the decline of the demand for the fossil fuels. In April 2020, amidst the covid-19 pandemic and even when the price of oil was at its lowest, the demand declined. In addition, the increase in the demand of the fossil fuels is not imaginable. It means that big corporations and economies which are reliant on oil will struggle with economic hardships. Bill Gates, the biggest investor in Technology, has predicted that investment in big oil companies is a huge mistake. This billionaire in COP26 meeting pointed out that these companies are doomed to fail and even he said that over the course of next 30 years some of these big companies will lose their values.”
As a matter of fact, at least in the next 25 years fossil fuels will preserve their role as the main resource of providing energy in the world. Because of this, the countries dependent on this resource in the next years will be independent from Iran and other OPEC members’ oils.
Accordingly, Iran as one of the biggest oil reserves in the world has to take its place back in the world in the fossil fuels’ market through fund raising. The data shows that energy consumption means are changing and as users of clean energies increases, we see a decline in the consumption of fossil fuel users. Yes! The chance to earn money from national resources is decreasing, and to preserve these resources for the future, we have no chance but to invest the profits of selling fossil fuels. We will show the dimensions why this is “necessary.”
The unsuccessful experience of giving away facilities and loans: it is more than one decade that the National Development Fund gives away imported resources and wealth in the form of facilities and loans for productional, infrastructural and developmental initiatives. Over the course of this decade, about 100 billion dollars was loaned to governments and about another 40 billion dollar was loaned to the private sector. From these resources only 10 billion was given back and a considerable part is overdue. The overdue part is mostly consisted of receivers who cannot payback their due or they are not willing to cooperate.
National Development Fund sees the profits from fossil fuels as a type of capital not wealth. It means that this capital must be invested in profitable sectors and from that sectors wealth creation occurs and this wealth has to be used in public sectors.
The fact that all the previous governments looked at this profit as wealth not as capital and used it as the budget used for running the country and civil purposes, was a grave mistake that destroyed the future generations’ share of fossil fuels. Albeit late, but it is necessary to know the difference between wealth and capital and act accordingly to the God-given gifts.
Banks and inability in collecting nonperforming loans: in the previous decade, National Development Fund facilities were given using special banks and the process of accreditation alongside guaranteeing. But now, the same banks cannot payback the realized loans to the Fund and even in their balance sheet there is column called, “Debts to National Development Fund.” They are carrying these debts on their shoulders. Also, some of the main loan-takers use some excuses to payback their debts or they procrastinate in paying their installments.
And sometimes, Banks do not have the potential to put pressure on the loan-takers because it will lead to abandonment of operation of production division and this itself will again bring about more overdues in paying back the installments.
The main approach of development funds around the globe: when looking at the function and programs of development funds around the world that had created wealth using national resources and have existed many generations, we realize that none of them acted as an organization that gives away facilities or loans, but they acted as an organization that invests on economic initiatives.
Some of these inter-generational funds are: the funds of China, Norway, UAE, KSA, Singapore and so on, whose asset values of some of them have become more than one thousand billion dollars.
Foreign exchange reserves: serving as an example: looking at the benefits of investment in comparison to facilities, we see if firm investment authorizations are not given to the Fund, it is inevitable that the National Development Fund’s outcome is going to be the same as foreign exchange reserves.
Nevertheless, the Fund has the power in its statute to invest and the chairmen have approved upon its decrees, but it has not been paid enough attention.
Looking at these circumstances, issuing licenses from Islamic Parliament of IR. IRAN in the forms of permanent or 5 years laws can be of help in the journey wealth creation and investment of National Development Fund.
To develop means circularity of the fund resources; the one and only struggle of experts when looking at the direction change of the Development Fund from giving away facilities to investment will result in falling into the trap of becoming a business enterprise. With all due respect towards this struggle, it has to be emphasized that the goal of investments of the Fund is not to become a business enterprise and even they called this process “toxic” to its goals. The ultimate goal is to create such enterprises.
To put it simply, National Development Fund is not looking to own the management of the enterprises, it aims to monitor their financial resources and with certainty realize how they will pay it back to use it in other projects or initiatives.
It is obvious that only through circularity of money and supporting numerous projects, development occurs. Also, National Development Fund in its investment initiatives, has considered just-in-time exits and have the necessary laws. Without any doubt, entering an initiative that its exit strategy is not vivid, National Development Fund will not prioritize it.
Issuing investment licenses does not bring about the end of giving facilities: another struggle that needs a vivid answer, is the facility programs of National Development Fund in the future. To answer this struggle, we need to emphasize that issuing all-encompassing investment licenses does not make the facilities to go away, some of the shares of the Fund will still be dedicated to economically-approved projects. It is the case if the banks can guarantee it so the Fund will not have any financial problems. In this path, the Fund is looking for mega-projects and to activate the participation of the private sectors in those projects.
Investment in shared fields, a suggestion with two benefits: in a situation that a considerable amount of Fund’s resources is in the power of the government in the form of claims, issuing investment licenses can bring what kind of profits and how it can be realized? National Development Fund stated that we are ready to receive our 100 billion dollars claims from the government and put it into use of the oil fields with the help of the private sectors. Issuing this license will realize the Fund’s claims and also is a great step forward in the investment process for the National Development Fund. In addition, it brings about the preservation of the national resources of the country.
At the end, we come back to the ‘necessity’ that was pointed out in this article. We should not forget that in the three previous decades, wealth creation was a choice the preserve the national resources which was a sign for a better tomorrow, but today, it is not a ‘choice.’ Because of the decline in the income and the clients of the fossil fuels, investment is considered a ‘necessity’ and every second that we procrastinate, the vividly bright future of the children of Iran will become vaguely dark.