Iranian metro funding will set example

07 November 2008
Tehran makes progress by attracting local private-sector investment to finance infrastructure projects.

Like its peers around the Gulf, Tehran is pouring billions into renovating its national transport infrastructure.

Unlike its neighbours, however, Iran has found it all but impossible to entice foreign banks to invest in these projects.

Still burdened by its pariah status on the global stage, Tehran has largely been forced to shoulder the bill for these schemes itself.

Viewed in this light, the ingenuity being shown to attract local private-sector investment to the expansion of Tehran metro is laudable.

A pilot scheme launched early this year to ease the financial burden on the project has proved successful enough to be rolled out across the city.

Under the scheme, land is bought by the government and sold to contractors at discounted prices.

Those companies can develop the land as they please, provided they incorporate a metro station into the work and agree to share profits from their commercial project on a short-term basis.

Officials do not expect to find private investors to build every station, and some of the deals struck so far have been very small.

But the recent $300m deal agreed with a local financial group is a big step forward. A few more of these would go a long way to putting a sizeable dent in the colossal $4bn bill anticipated for building the stations.

The metro is certainly a priority for government funding. The city’s 15 million people are hampered by endless gridlock, and the existing metro lines are completely inadequate. However, the country’s massive oil revenues will only go so far and there are many projects competing for these resources.

The metro’s example points to one way for projects around Iran to find funding, and with the Gulf project finance market floundering, it could even be imitated beyond Iran.

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