BRITAIN'S MG ROVER SEEKS TO PRODUCE CARS IN IRAN: FT REPORT.

TEHRAN, July 2 Asia Pulse - A lossmaking British carmaker is negotiating to produce automobiles in a frontier Iranian city near Afghanistan, the London-based daily Financial Times has said.

MG Rover is holding talks with Dastan which is a privately owned company in the province, the paper said, adding negotiations were in an advanced stage.

The assembly plant would be sited in Chah-Bahar, a port city on the Sea of Oman and one of the three free-trade zones offering incentives for foreign investments. A press shop would be built in Zabol, a border town 400 miles to the north, close to Afghanistan, it added.

The paper quoted Russ Thomas, business development manager, as saying that the project would be Iranian-funded and on a supplier-to-customer basis, not a joint venture.

Coventry-based First Automotive, on the other hand, was negotiating with Dastan the sale of the Rover 100 production line which it bought from BMW before the German carmaker sold MG Rover a year ago, it said.

The proposal package, the paper said, has been given strong moral support from local and central authorities eager to develop the province, but the question of translating the plan into financial backing remains to be resolved.

"There is a thriving business opportunity here, especially because of the U.S. embargo against Iran. If British companies are to exploit this market, they should get here fast," Financial Times quoted the director of First Automotive, Mike Ross as saying.