Singapore has moved quickly to sign an investment treaty with oil-rich Iran to support Singapore firms investing in an economy that is emerging after the recent lifting of global sanctions.
The treaty offers a legal framework to protect investors and promote bilateral investments.
Minister for Trade and Industry (Industry) S. Iswaran signed an Agreement on Reciprocal Promotion and Protection of Investments, also known as a bilateral investment treaty, with Iran's Minister of Finance and Economic Affairs Ali Tayyebnia in Teheran.
Singapore is the second country, after Japan, to sign a bilateral investment treaty with the Middle Eastern nation after international sanctions were lifted in mid-January.
"We are here now to deepen the economic collaboration between our two countries," Mr Iswaran told the media after the ceremony.
"We see significant opportunities to do so because of the size of the market in Iran and in the region, and the capabilities of the people.
"For Iranian businesses, there are interesting opportunities in Singapore and through Singapore into South-east Asia and the larger market of Asia," he added.
Mr Iswaran arrived in Teheran on Sunday for a three-day visit to explore new business and investment opportunities. His trip coincides with a one-week mission by the Singapore Business Federation (SBF) to the Iranian capital.
Mr Iswaran also met Iranian Minister of Industries and Business Mohammad Reza Nematzadeh and Minister of Cooperatives, Labour and Social Welfare Ali Rabiei.
With this agreement, Singapore investments will be treated as favourably in Iran as any other investments – foreign or local. And businesses can transfer capital and returns between the two countries without obstacles.
The treaty also provides Singapore investors with the option to resolve investment disputes through international arbitration.
The Ministry of Trade and Industry said Singapore's bilateral trade with Iran was $6.6 billion in 2011, before the sanctions were imposed. It fell to $2.6 billion in 2012, after the sanctions kicked in. Last year, trade stood at $171.4 million, with Singapore exporting $158 million worth of goods to Iran, while imports from Iran to Singapore amounted to $13.4 million.
Singapore firms have shown renewed interest in the oil-rich country, which is just re-opening its doors after a prolonged period of under-investment.
A total of 51 firms from various sectors, including oil and gas, petrochemicals, logistics and information communications technology, have been in Teheran since last Friday, gaining first-hand knowledge about the business environment and investment opportunities.
This is the SBF's fifth delegation to Iran, and the largest group that it has taken to the Middle East so far.
The delegation comprises two main groups – companies that were previously doing business in Iran and are now seeking to re-establish dealings after the lifting of the sanctions, and companies that are completely new to the market.
"Singapore companies are known for our quality, reliability and the service we deliver… but competition is greater than before and others are running very fast," said Mr Teo Siong Seng, SBF chairman and leader of the business mission.
Singapore businesses are facing stiff competition from South Korean and European companies, which are pursuing deals in Iran, he noted.
According to the Teheran Times, South Korea on Sunday signed a memorandum of understanding with Iran to provide €5 billion (S$7.7 billion) in financing for infrastructure, development and manufacturing projects in the country.
Many of these businesses tend to be bold and are willing to put in huge investments. Singapore companies, however, tend to be more careful, said Mr Teo.
"We could start in a smaller way, but we should start to see some activities going forward," he added.